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Citation:
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Date: 20030124
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Docket: 2002-2126(GST)I
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BETWEEN:
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WILLIAM N. MARACH,
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Appellant,
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and
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HER MAJESTY THE QUEEN,
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Respondent.
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REASONS FOR JUDGMENT
Bell, J.T.C.C.
ISSUE:
[1] The issue is not set forth in the
Notice of Appeal. It merely states that the Appellant was not
liable to collect tax under the Excise Tax Act
("Act") respecting Goods and Services Tax
("GST") and was not liable for penalties under section
280 of that Act. The Reply to the Notice of Appeal
describes the issue as
...whether the Minister properly assessed the Appellant
for tax, interest and penalties pursuant to section 296 of the
Act.
[2] At the commencement of the
hearing, Appellant's counsel explained that the Appellant
came to him with income tax documents, not GST documents. Counsel
found the GST Notice of Decision and quickly filed a Notice of
Appeal. He then explained that he did not amend the Notice of
Appeal because he thought the matter would be settled. He then
stated that the issue was whether the Appellant was in
partnership with one Shigeru Amano ("Amano"),
architect.
[3] The Appellant submitted that, on
the authority of Decaire & Diesel v. The Queen,
[1999] G.S.T.C. 93, the partnership was the person liable to
collect and remit GST with the result that the partnership, not
the Appellant was liable for GST. Counsel then said that if the
Appellant was not in partnership, his appeal would fail.
FACTS:
[4] The Minister of National Revenue
("Minister") assessed the Appellant for GST, interest
and penalties respecting the periods from February 1, 1994 to
December 31, 1999.
[5] The Appellant testified that he
had graduated from the University of British Columbia in
architecture in 1968 and that he was a member of the Royal
Architectural Institute of Canada. He said that he was in
partnership with Amano from 1994 to 1999. He followed this by
saying that he was in the practice of architecture and project
management into 2000. After work in other jurisdictions and
organizations the Appellant said that he joined Amano in the
mid-1970s and worked, not as a partner, with him until 1982. He
then moved to the Northwest Territories where he remained for ten
years, returning to Vancouver in 1992 at which point he contacted
Amano who expressed interest in working together. He said that
they formed a partnership in 1994 which carried on into January,
2000. He testified that, before moving to Vancouver in 1992,
Amano had told him that he was busy with more work and wanted the
Appellant to join him as a partner, that architecture was
changing and that its new phase was project management and that
he, the Appellant, would be a good complement to the firm.
[6] He stated that Amano would
continue with the business aspects and would bring in work. The
Appellant said that he would do design and production work and
project management. He further stated that he and Amano agreed
that expenses would "come off the top" and that profits
would be calculated and distributed on a 50/50 basis.
[7] The Appellant stated that he did
design work, correspondence and "spec writing" in his
office at home. He said that the agreement was not reduced to
writing because he had known Amano since the 1960's and
trusted him. He also said that Amano did not like documents and
that he did work on the basis of a handshake or a brief letter.
He added that he felt the same.
[8] Appellant's counsel produced a
bundle of "break-out" sheets for each of the years 1994
to 1999 inclusive. He said that they were prepared by Amano and
given to him. There were 17 sheets for the 1994 year setting
forth, by project, the amount of fees received, the amount of
overhead, expenses paid to employees in certain cases and on each
page, the 50 percent allocation of profit. Many of the sheets for
all years bore the endorsement of payment and date of payment.
There were 26 such sheets for 1995, 25 sheets for 1996, 19 sheets
for 1997, 18 sheets for 1998 and 18 sheets for 1999. He stated
that Amano did the accounting, collected the revenue, calculated
expenses, prepared the sheets, determined the revenue, and
reimbursed him, the Appellant, for expenses. He explained that
the sheets were not prepared on a regular basis but whenever
Amano had done the bookwork. The sheets for all years allocated
50 percent of the profit to the Appellant.
[9] The Appellant described his work
as gathering the required information from clients, preparing the
design, approaching structural, mechanical, electrical and code
consultants, preparing drawings, dealing with building permits
and, sometimes, project managing. He said that he and Amano
together spoke to the client at the beginning of a project. They
would then decide the scope of the project and garner the
necessary information. The Appellant stated that they did work
for many of Amano's repeat clients but that if a new client
was obtained, Amano would introduce the Appellant as his partner.
He said that the consultants were required to receive proposals
and that he then reviewed them respecting the scope of work and
reasonableness of fee and would negotiate with them for
submission to the client. He stated that either Amano or he would
ask for a fee adjustment.
[10] The Appellant was referred by counsel
to a typical proposal, this one being made to the City of Red
Deer, prepared and signed by the Appellant on a letterhead which
bore the name "Shigeru Amano Architect" followed
by the address. He stated that he and Amano had discussed whether
his name would be in the firm and he said that it was "never
an issue to me". That letter contains the following language
in different places:
In response to your recent proposal call we hereby
submit our proposal ...
Our proposal consists of the following ...
We feel our firm ....
... our firm has been involved in design,
construction and project management in Red Deer since 1984.
We have just recently completed a major addition
... in which we acted as architects and project
managers.
... we have become familiar with contractors,
suppliers and building authorities ... in Red Deer.
... ours is a small firm with both
principals directly involved in and controlling our
projects.
Third, both principals have degrees in architecture and
long experience as practicing architects.
In closing, we would like you to know that we
are very much taken with Red Deer from our past and
present work.
(italics added)
The Appellant testified that "our" and
"we" refer to him and Amano.
[11] Counsel then presented, in evidence,
the Appellant's curriculum vitae describing the Appellant
as:
Partner Shigeru Amano Architect, Richmond
B.C.
[12] He stated that when he had worked with
Amano before 1994 he submitted invoices and was paid. He then
said that in 1994 when they started the partnership, he stopped
sending invoices and the aforesaid sheets with profit computation
were prepared by Amano.
[13] Also introduced in evidence was a
letter on Amano's letterhead dated August 29, 1995 reading as
follows:
To whom it may concern:
Shigeru Amano Architect is a professional firm in operation
since 1967.
A list of the firm's current projects is attached. Current
receivables over the next 12 months, from actual jobs in hand,
amount to $345,000. Projected receivables from jobs in hand with
Phase 2 approvals pending amount to $49,000.
There are 15 proposals on our current project list that are
not included in receivables.
Nick Marach is a 50% partner in this firm, and has been since
1992. His projected income from the current projects is in the
$100,000 range.
Shigeru Amano
The Appellant stated that the 1992 date in the last paragraph
was in error and should have been 1994.
[14] The Appellant stated that his
understanding of liability was that both he and Amano were liable
for claims because they were the two professionals and were
insured.
[15] The Appellant then said that he severed
relations with Amano in December, 2000. He described the illness
of Amano's wife growing worse and Amano's attention being
directed to her resulting in he, the Appellant, taking on more
responsibilities. He said that because Amano's attention was
wholly directed to his wife, promotion, contacts and news jobs
"didn't happen". He said that very little business
was coming in and that there was not enough for him to do.
[16] The Appellant testified that he
reported his income as professional income on his income tax
returns for the 1994 to 1999 years inclusive. He said that he had
no accounting training, that he reported that sum, being a 50
percent share of profit from the aforesaid sheets, and that he
deducted the expenses of his home office which he had paid. He
said that he did not prepare GST returns for those years,
assuming that Amano had done so. He said that their understanding
was that Amano would handle the business side, taxes, licenses,
et cetera, and that he thought the partnership would have to file
respecting GST and that that would be done. He said that he had
no experience with GST before joining the firm.
[17] Appellant's counsel presented to
him a copy of a letter from Canada Customs & Revenue Agency
("Agency") dated February 16, 2001 stating that it had
approved his application for Goods and Services Tax et cetera. He
said that he had not applied for that and assumed he was simply
assigned a GST number. He stated that he then retained an
accounting firm to look into GST, that returns were prepared
after he gave them his income tax returns, telling them that his
income was from a partnership. He stated that the accountant did
not show him the returns before they were filed and that he was
disappointed. He said that he had a one-half hour meeting with
the accountant who two weeks later retired and "gave my
business to someone else". He said that he did not
understand why he was registered or why the Agency wanted him to
file GST returns. He said that he thought that it would be
handled by Amano.
[18] On cross-examination, when asked if he
obtained one-half of the business assets when he departed in
2000, he replied that he had not and that it was an issue. He
said that he did not see the GST returns, that he had looked for
a reputable firm and had relied upon it. When asked if he
expected the returns to be filled out in the manner they were, he
said that he did not know. He added that this was the first time
that he used an accountant respecting tax and that he went to the
accountant because he had received the above notice from the
Agency.
[19] Respondent's counsel produced a
copy of the Appellant's business card which showed the
name:
Nicholas Marach
Shigeru Amano Architects
6409 Arbroath Street, Burnaby, B.C. V5E 1C3
Telephone (604) 433-7700/Fax: (604) 433-9481
Counsel asked him if he had any other business card with the
word "partner" on it. The Appellant replied negatively.
When asked why his name was not on the letterhead he replied that
it was not important to him and that it was not worth the cost to
produce new letterhead, envelopes, and business cards. When asked
if he was introduced by Amano as a partner he replied that at
times he was sure he was, but not necessarily for repeat clients.
He said that he and Amano went jointly to new clients'
premises and that he was introduced by Amano "that
way". When asked if he had indicated on his tax return that
he was a partner, he replied that he put in his professional
income. When asked if he gave anything to the Agency saying that
he was a partner in each of the years he replied that he did not
think so. When asked if he had intended to be a partner he
replied that he could give something to the firm that it
didn't have. He further stated that after his time in the
Northwest Territories, he was not going to be an employee. When
asked if he and Amano had an agreement, he said that they would
be splitting profits. When asked if he felt that one-half of the
equipment of the firm was his, he replied affirmatively
respecting the ones upon which he had made payment, adding that
the initial assets were very rudimentary. He explained that he
did not ask for a split of the asset value when he left the firm
because it was a tense time, not much was coming in, he was
experiencing financial hardship, that Amano's wife had died,
that he felt badly and that he was sympathetic in those
circumstances adding that it "wasn't the time".
[20] The Appellant answered Respondent's
counsel's questions to the effect that he did not have a bank
account and he did not have signing authority with Amano. He
stated that he and Amano prepared fee schedules together. When
asked if he was able alone to talk to a client and come to an
agreement, Appellant replied: "On behalf of the firm,
yes". The Appellant, in response to other queries, stated
that Amano saw all of his proposals and that he thought he saw
all of Amano's proposals. When asked if he charged GST in the
proposals he wrote, he responded "I don't know". He
then said that he would imagine whatever was required by law was
done. He also said that he did not remember whether Amano's
proposals included GST and that that was in Amano's area.
[21] When examined about a line on his 1994
income tax return that referred to net partnership income,
nothing appearing there, he said that he didn't see it and
that he did not report income for the total business. At that
point, Appellant's counsel stated that the Appellant would
admit that he described his 50 percent share of partnership
income as "gross professional income" and then deducted
expenses.
[22] The Appellant described the above
referred to letter written by Amano describing him as a partner
as being written because he was buying a house and thought that
it would be useful. When asked if Amano had discussed GST with
him, the Appellant replied that Amano had raised it and asked if
he, the Appellant, had "done GST". He said that he
thought that Amano was doing it. When he was then asked if had
pursued this matter with Amano after that, he replied that he had
not done so, it being a very bad time for Amano with his wife
ill.
[23] The Appellant's second witness,
John Bajan, Chartered Accountant ("Bajan") stated that
he was the Chief Financial Officer for a company for whom a
22,000 square foot expansion planned by Amano was being made. He
testified that he was the construction manager and that his boss
wanted him to build it. He said that the plans were done prior to
him starting and that he, at his employer's suggestion,
called Amano. He then said that Amano told him that he had not
done the plans and that his partner, William Nicholas Marach had
done them. He said he visited the Appellant who gave him a tour
of the offices and introduced him to various personnel. He stated
that the Appellant pointed to Amano's office and said that
that was his partner's office.
[24] The Appellant then produced Jean Bumen,
an architect, as a witness. She stated that she was an architect
and a building code consultant. She said that she had known the
Appellant for seven or eight years and had known Amano about the
same time. She said that she helped him with three major projects
and "smaller issues", being the building code
consultant for same. She stated that when she was hired she
wanted to know the Appellant's relationship with Amano
because the company name was Shigeru Amano only. She added that
the Appellant told her that they were partners and that Amano did
not say that it was not the case. She stated that mostly Amano
did the proposals and the Appellant did the design. She said that
both were involved in the projects. On cross-examination she said
that Amano was not present when she spoke to the Appellant.
[25] Amano, produced by Respondent's
counsel as a witness, stated that he and the Appellant
"shared fees 50 percent, on a verbal arrangement". When
asked if the Appellant was a partner he responded that he was not
registered and that to be a partner one must be registered. When
asked if it was intended that the Appellant be a partner Amano
responded that he never had it written. He then said that his
understanding was that the Appellant was a consultant. Amano also
said that he had no invoices from the Appellant after an invoice
dated June 28, 1993.
[26] Amano stated that after expenses on the
fees, he showed profit. He figured the monthly expenses. He said
that initially he took a percentage to establish monthly expenses
of roughly $3,000 per month, initially having used a 15 percent
factor and later reducing it to 10 percent.
[27] Amano said that he owned the assets in
the firm including a computer, a photocopy machine and a fax
machine. He said that the charge to the Appellant for these was
included in the 15 percent. He said that he did not give any
assets to the Appellant when he left the firm and further that
the Appellant had no assets of his own in the firm. He stated
that the Appellant did not have signing authority on the bank
account and that he alone dealt with the bank and money
transactions. He said that he prepared the fee quotations,
discussing same occasionally with the Appellant. He also said
that he had mostly verbal agreements with clients. When asked if
he wrote letters to his clients he replied that he guessed
"Nick did". When asked with whom clients initially
dealt, he responded it was he, that he was the architect, that
this was his firm and that it was a proprietorship. He stated
that he and the Appellant worked together and when asked if the
Appellant took on more responsibility he responded, "not
really". When asked if he discussed GST with the Appellant,
Amano said "yes" and when asked when that was he
responded "no idea". With respect to a Statement of
Professional Activities which seems to have been part of a tax
return he stated that he reported professional fees as gross
income in the amount of $261,358.30, that there was no
partnership and that he "owned 100 percent". When asked
if he recalled using the word "partner" he replied
"yes". He was then referred to the letter addressed
"To whom it may concern". He said that it was signed by
him and that the purpose was to assist the Appellant in obtaining
a loan or mortgage money, to prove he had income. On
cross-examination, Amano said that he had never been a partner
with an architect but that he had been a partner in a food
processing operation, in an apartment developing enterprise and
in various partnerships in the past thirty to forty years. He
stated that he had prepared the "break-out" sheets, and
that he had given cheques to the Appellant for 50 percent of the
profit. He stated, with respect to the Red Deer proposal, that
the Appellant had prepared the letter, that he, Amano had
discussed it with the Appellant and that he had agreed with the
contents. When asked why he used the word "partner" in
the above referred to letter he said he just wrote it for the
bank. When asked if he wrote it to mislead the bank he replied
negatively. When asked if he had said in that letter that the
Appellant was a 50 percent partner, he replied, "I guess I
did". When asked if he told Bajan that the Appellant was a
partner he stated that he could not recall.
APPELLANT'S SUBMISSIONS:
[28] Appellant referred to Larry Decaire
& Dorrin Diesel dba A-OK Construction v. The Queen,
[1999] G.S.T.C. 93, a decision of this Court. After stating that
the issue was whether the relationship of Amano and the Appellant
was a partnership he referred to the Reasons in Decaire,
particularly portions of paragraph 20 and 21.
[20] ... In accordance with
the above provisions, a partnership is, for purposes of the
Act, defined to be a person. Since that
person conducted the business, it is the person
providing the taxable supply and required to be registered, it is
the person required to file and to calculate tax and it is
the person required to collect and remit that tax.
[21] Subsection 145(1), set out
above, clearly provides that an activity engaged in by a
person as a member of a partnership shall be deemed to be
an activity of the partnership and not to be an activity
of the person. Support for the conclusion that I have reached
lies in the words of subsection 272.1(5), added in respect of the
post-April 23, 1996 period, which refers to:
... amounts that became payable or remittable by the
partnership ...
it being clearly anticipated that a partnership, under the
Act, can be the person who is required to collect
and remit tax. Since the partnership was the person which
conducted business and since a person includes a
partnership under this Act5, that partnership
was the person required to collect and remit tax. The
Appellants, having had no obligation so to do, this appeal is
allowed with the result that they are not liable for tax,
interest and penalties as assessed.
__________________
5 It is clear that a partnership is not a person
except when expressed by codified law to be such.
[29] Counsel then referred to the British
Columbia Partnership Act, section 2 of which reads:
Partnership is the relation which subsists between persons
carrying on business in common with a view of profit.
He then referred to section 4(3) which reads:
In determining whether a partnership does or does not exist,
regard must be had to the following rules:
...
(c) the receipt by a
person of a share of the profits of a business is proof in the
absence of evidence to the contrary that he or she is a partner
in the business, but the receipt of a share, or of a payment
contingent on or varying with the profits of a business, does not
of itself make him or her partner in the business ...
[30] Counsel then referred to Backman v.
The Queen, 2001 DTC 5149. He highlighted portions of
paragraphs 19 and 20, reading as follows:
[19] In law, the meaning of "carrying on a business"
may differ depending on the context in which it is used.
Provincial partnership acts typically define "business"
as including "every trade, occupation and profession".
The kinds of factors that may be relevant to determining whether
there is a business are contained in the existing legal
definitions. One simple definition of "carrying on trade or
business" is given in Black's Law Dictionary (6th
ed. 1990), at p.214: "To hold one's self out to others
as engaged in the selling of goods or services."
...
[20] The existence of a valid
partnership does not depend on the creation of a new business
because it is sufficient that an existing business was continued.
Partnerships may be formed where two parties agree to carry on
the existing business of one of them. ...
Counsel then referred to paragraph 21 which reads in part:
[21] ... As was noted in
Continental Bank, supra, at paras.34-35, a recognition of
the authority of any partner to bind the partnership is relevant,
but the fact that the management of a partnership rests with a
single partner does not mandate the conclusion that the business
was not carried on in common. This is confirmed in Lindley
& Banks on Partnership (17th ed. 1995), at p.9,
where it is pointed out that one or more parties may in fact run
the business on behalf of themselves and the others without
jeopardizing the legal status of the arrangement. It may be
relevant if the parties held themselves out to third parties as
partners, but it is also relevant if the parties did not hold
themselves out to third parties as being partners. Other evidence
consistent with an intention to carry on business in common
includes: the contribution of skill, knowledge or assets to a
common undertaking, a joint property interest in the
subject-matter of the adventure, the sharing of profits and
losses, the filing of income tax returns as a partnership,
financial statements and joint bank accounts, as well as
correspondence with third parties: see Continental Bank,
supra, at paras.24 and 36.
[31] Counsel then stated that perhaps there
was conflicting evidence but Amano conceded that the Appellant
was sometimes held out as a partner. Counsel referred to evidence
from two witnesses to the effect that the Appellant held himself
out as a partner. He then said that Bajan said that both Amano
and the Appellant held themselves out as partners. He said that
there was no joint bank account. He then said that
Respondent's counsel tried to make something of the assets
not being distributed but stated that they were too few to be
important. He submitted that Amano was scrupulous in seeing that
the Appellant received his profit. He submitted that when
business was carried on in common with a view to profit it was
not necessary to find all factors outlined in the partnership
description as being required. He referred to Loewen et al v.
The Queen, 1998 G.S.T.C. 6 where three Appellants were
assessed as a partnership in respect of GST not remitted on a new
home built and sold by them. He referred to a letter from the
solicitors to the Appellants referring to:
... the sale proceeds due to you.
The judge of this Court stated that the letter was clearly
addressed to all three Appellants and could be construed only as
a reference to all three Appellants. He added that it may be
inferred from the contents of that letter that the Appellants
shared in the profits resulting from the construction and sale.
He submitted that in the absence of evidence to the contrary he
was satisfied that the Appellants carried on business with a view
to share in the profits and that, accordingly, a partnership
existed.
[32] Counsel stated that the Appellant and
Amano were involved in a number of projects over a number of
years, not just one project as in the above case. He then
referred to Volzke Construction Ltd. v. Westlock Foods
Ltd., [1986] 4 W.W.R. 668 where the plaintiff built an
addition to a shopping centre for which it was not completely
paid. It brought an action against the defendant alleging that it
was liable on the construction contract as a partner of a company
which had awarded the contract to the plaintiff. The defendant
denied liability, claiming it was merely a co-owner of the
shopping centre and no partnership existed between it and the
other party. The Alberta Court of Appeal, respecting the
definition of a partnership in the Alberta Act referred to
section 4(c) stating that a receipt by a person of a share of the
profits of a business is prima facie proof that that
person is a partner in the business. It then concluded that on
all the facts, including an agreement between the third party and
the defendant to split the profits 80/20 and the fact that they
referred to each other as partners, the defendant was a partner
in the operation of the shopping centre. Counsel then reminded
the Court of the clear agreement of 50 percent of profit and
costs determining the distribution in the instant appeal. Counsel
also referred to 4 T's Industries Ltd. v.
Kahle, 1992 Carswell B.C. 1885, (B.C. Supreme Court).
[33] He submitted that Amano wanted someone
to handle detail and manage projects and that was why he brought
the Appellant in as a partner.
Counsel then referred to the Statement of Professional
Activities, effectively describing Amano's method of
reporting and stated that the Appellant simply totalled the
"break-out" sheet amounts as his income, being 50
percent of profit.
[34] He referred to the description of the
Appellant in Amano's letter, as a partner, the evidence of
two other credible witnesses as evidence of partnership and
asserted that their testimony was not contradicted. He suggested
that Amano chose the word "partner" when it suited his
purpose.
RESPONDENT'S SUBMISSIONS:
[35] Respondent's counsel referred to
the evidence of the two witnesses who referred to the description
of the Appellant as a partner and referred to the 1995 letter
referring to the Appellant as a partner and stated that
that's all that was written or said respecting
partnership.
[36] Counsel referred to Continental Bank
Leasing Corp. v. Canada, [1998] 2 S.C.R. 298 and referred
specifically to paragraphs 23, 24 and 25, highlighting certain
portions as follows:
[23] The existence of a
partnership is dependent on the facts and circumstances of each
particular case. It is also determined by what the parties
actually intended. ...
[24] ...The indicia of a
partnership include the contribution by the parties of money,
property, effort, knowledge, skill or other assets to a common
undertaking, a joint property interest in the subject-matter of
the adventure, the sharing of profits and losses, a mutual right
of control or management of the enterprise, the filing of income
tax returns as a partnership and joint bank accounts.
...
[25] In cases such as this,
where the parties have entered into a formal written agreement to
govern their relationship and hold themselves out as partners,
the courts should determine whether the agreement contains the
type of provisions typically found in a partnership agreement,
whether the agreement was acted upon and whether it actually
governed the affairs of the parties ...
[37] Counsel stated that Amano contributed
the only assets to the firm. She stated that Amano alone dealt
with the bank and fee quotations. She said that Amano had
reported the entire amount on his return and deducted expenses.
She submitted that it was important how the parties held
themselves out to the tax department. She said that the Appellant
never referred to other income, simply calling it professional
come. She said that the Appellant made no suggestion of
partnership in his income tax return. She stated that Amano
signed the cheques to pay the Appellant, there was no payout at
year end, and no splitting of extra funds. She submitted that
there were no written documents suggesting partnership.
[38] Counsel then referred to Molinaro v.
Canada, [2000] F.C.J. No. 147, particularly paragraph 10
quoting Linden, J.A. from The Queen v. Friedberg, 92 DTC
6031, where he referred to the importance of form.
[39] Counsel ended with the submission that
the Appellant did not illustrate due diligence in this case.
APPELLANT'S REPLY SUBMISSIONS:
[40] Appellant's counsel said that the
Appellant's income tax information was correct. He stated
that the Appellant did not say that he had a sole proprietorship
or a partnership. He submitted that professional income could be
earned by a proprietor or a partner and that there was nothing
sinister about the lack of description of source. He suggested
that, respecting GST, the Appellant had no involvement in
charging or collecting it and that there was nothing sinister in
that fact. He submitted that returns do not tell the tax
department anything about a taxpayer's thought process. He
also submitted that it was a novel proposition that the partner
did not pay for assets when it was his skill and expertise that
were contributed to the endeavour.
ANALYSIS AND CONCLUSION:
[41] I have concluded that the Appellant was
a partner during the periods in respect of which the Minister
assessed GST, interest and penalties. He brought valuable assets,
namely his skill and experience, to his relationship with Amano.
During the relevant six years he received 123
"break-out" sheets prepared by Amano, each showing the
allocation to him of 50 percent of the profit. Amano introduced
him to clients as a partner. Amano referred to him in a letter,
written to assist him in obtaining bank financing, as "a 50%
partner in this firm". His letter written to the City of Red
Deer dated February 24, 1999, was replete with words such as
"we", "our firm" and "both
principals", the Appellant having described the
"we" as Amano and himself. He described himself as a
partner in his curriculum vitae. He explained, credibly, his
reasons for not insisting on him being described as a partner on
stationary and business cards. Respecting him not having signing
authority on the bank account, he was satisfied with Amano
looking after monetary affairs. He explained satisfactorily,
referring to the illness and death of Amano's wife, why he
did not pursue monetary accounting for what he regarded as his
share of physical assets.
[42] His not having described himself as a
partner to the Agency is of little, if any significance. His
statement that, after returning to Vancouver from the Northwest
Territories, he did not intend to be an employee, is significant.
Of further significance is the fact that he stopped sending
invoices for his services to Amano in 1993.
[43] Amano seemed detached and somewhat
irritated while testifying. His denial of the existence of a
partnership was abbreviated and dismissive. In spite of the fact
that he introduced the Appellant as his partner and described him
in a letter as "a 50% partner in this firm" he stated
that his firm was a proprietorship. He said he could not recall
whether he told Bajan that the Appellant was a partner.
[44] Respondent's counsel made no
attempt to describe the Appellant's status, if not a partner.
There was no evidence as to Amano having made any source
deductions and remittances respecting the Appellant.
[45] The joint endeavour was a relation
subsisting between Amano and the Appellant carrying on business
in common with a view to profit. Not all indicia of partnership
were present in their relationship but that is why the case was
before the Courts. It is my conclusion that the preponderance of
evidence weighs in favour of the Appellant.
[46] Accordingly, as determined in
Decaire (supra) the partnership was the person required to
collect and remit tax. It was the "person", as defined
in the Act, which conducted business. The Appellant,
having had no obligation to do so, the appeal is allowed with the
result that he is not liable for tax, interest and penalties as
assessed.
[47] Appellant's counsel having
requested an opportunity to make submissions respecting costs if
his client succeeded in his appeal, the parties or either of them
may contact the Court within 30 days regarding costs.
Signed at Ottawa, Canada this 24th day of January, 2003.
J.T.C.C.
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