Citation: 2007TCC124
Date: 20070309
Docket: 2004-4726(GST)I
BETWEEN:
RÉMY THERRIEN,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
[OFFICIAL ENGLISH
TRANSLATION]
REASONS FOR JUDGMENT
Delivered
orally from the bench on January 25, 2007, at Québec, Quebec.
Tardif J.
[1] This is the appeal
from an assessment bearing the number PQ‑2003‑7222, dated August
19, 2003, pertaining to the Goods and Services Tax (“TPS”).
[2] These are the
issues:
(a) As
director of the company, is the Appellant solidarily liable to pay, together
with the company, the net tax payable as well as interest and penalties?
(b)
Did the Appellant, as director of the company, exercise the degree of care,
diligence and competence to prevent the company’s failure to pay the net tax
payable that a reasonably prudent person would have exercised in comparable
circumstances?
[3] To establish and
confirm the assessment under appeal, the Minister of National Revenue, (the
“Minister”) relied on the assumptions of fact listed in the Reply to the Notice
of Appeal (the “Reply”); they read as follows:
[TRANSLATION]
(a) During 1997
and 1998, the Appellant was a director of the company Pro‑Co Beauce Ltée
(the “Company).
(b) During the
years mentioned above, the Company was registered for application of the GST.
(c) Following
the audit of the Company’s tax returns, it was noted that the Company had
collected GST without delivering it to the Respondent during the period from
April 1, 1997, to December 31, 1998.
(d) On February
8, 1999, a certificate against the Company for $9,880.28, bearing the number
GST‑463‑99, was registered in the Federal Court and a writ of seizure
was reported in part unfulfilled in respect of this sum on July 13, 2002.
(e) The
Appellant was the Company’s only director during the periods when it was
required to pay the net tax to the Respondent and looked after the Company’s
day-to-day management.
(f) On February
24, 2000, the Appellant stood surety towards the Department of Revenue for the
payment of the Company’s debt.
(g) In addition,
on April 4, 2000, the Appellant signed, as president of the Company, an
engagement by the Company to respect an agreement.
(h) Also, on
March 29, 2001, the Appellant signed, as president of the Company, the Company’s
tax return.
(i) The
Appellant acted as director of the Company throughout the negotiations with the
Respondent for settlement of the Company’s debt.
(j) The
Appellant, as director of the Company, did not act with the degree of care,
diligence and competence to prevent the failure that a reasonably prudent
person would have exercised in similar circumstances.
(k) In
particular, the Appellant was aware of the Company’s defaults of payment during
the period at issue and took no concrete or positive measures to prevent the
Company’s failures.
[4] I first explained
to the Appellant the procedure for presenting his case. I also mentioned to him
that he had the burden of proof, that is that he had to clearly demonstrate
that the assessment was not justified and should be set aside for reasons that
he had to prove.
[5] In support of his
appeal, the Appellant essentially argued that the statute of limitations had
expired and that the assessment should be set aside for that reason alone.
[6] To support his
claims, he submitted that he had a Quebec notary prepare a document entitled “ Pro‑Co Beauce
Ltée – Resignation” (Exhibit A‑1) and signed it in his presence.
[7] I then asked the
Appellant, and even repeated, whether that was the only point that he wished to
submit to the Court. He stated that it was the only argument that he was
submitting in support of his appeal.
[8] The Respondent gave
convincing evidence that the Appellant had never ceased to look after the
business of the Company, of which he was the sole shareholder. He had
negotiated and signed agreements on the payment of the amounts due. What is
more, he agreed personally to pay these amounts, thereby conferring contractual
rights on the Minister for the collection of the amounts described in the
agreement.
[9] Although it seems
obvious to me that this written agreement confers rights on the Respondent, it
is not up to this Court to define the rights inherent to this agreement.
[10] In this case, the
Appellant never demonstrated the ground of his claims as to the statute of
limitations. Indeed, the document that he signed before the Quebec notary has
no legal value as concerns the Respondent, who is in no way bound by this
document; it is essentially a private document with no impact or effect as to
the rights of third parties. Moreover, the evidence established that Appellant
had never truly ceased his business with the Company.
[11] To terminate a
company, it is imperative to follow certain rules; it is not sufficient to see
a legal professional and to indicate readiness to sign a declaration to the
effect that operations have ceased. To declare one’s resignation from one’s
position privately and unilaterally does not discharge the resignee of all
obligations.
[12] In this case, the
Appellant did nothing of the sort, on the contrary, after attesting, by only
his signature, that he was resigning and that the business had ceased its operations,
he ostensibly carried on as though he had never signed such a document.
[13] The Appellant did
not submit any evidence as to the legal basis of the assessment, even though
the Court had indicated to him the importance of this aspect.
[14] The Respondent gave
proof that all of the assumptions of fact mentioned in the Reply were exact,
thereby completely validating the grounds of the assessment.
[15] The Appellant
essentially argued that the assessment was groundless and had to be set aside
due to the statute of limitations. According to the Appellant the period of the
statute of limitations had started when he signed before the Quebec notary the
document that the notary had prepared for him upon his instructions.
[16] Not only did this
document have no value as concerns third parties including the Respondent, it
also had no effect as to the end of the Company’s operation, since the balance
of probabilities shows that the Appellant continued, after signing this
document, to look after the company’s business as if nothing had happened.
[17] Although the
Appellant did not submit any evidence as to the grounds of the assessment, the
Respondent gave very convincing and well-supported evidence to the effect that
the Appellant had acted negligently, carelessly and even abusively, in that he
had financed the Company’s business with amounts that he should have delivered
to the Minister. He acted knowingly and with no excuse to the point that there
is no doubt that he engaged his personal liability, the basis of the
assessment.
[18] For these reasons,
the appeal is dismissed, with costs.
Email this Content