Date: 20010510
Docket: 2000-1269-GST-I
BETWEEN:
KENNETH GORDON ALBERTAN,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
Hamlyn, J.T.C.C.
FACTS
[1]
This is an appeal under Part IX of the Excise Tax Act (the
"Act") in respect of the goods and services tax
third party Notice of Assessment numbered 24760, dated February
17, 1998, wherein the Minister of National Revenue (the
"Minister") assessed the Appellant in the amount of
$36,732.60, calculated as follows, in accordance with subsection
323(1) of the Act:
Period
Net
Period
Ending
Tax
Interest Penalty
Balance
1992-03-31
$15,838.49
$9,876.96
$10,880.15
$36,595.60
Legal
fees
137.00
0.00
0.00 137.00
$15,975.49
$9,876.96
$10,880.15
$36,732.60
[2]
In response to this assessment the Appellant filed an appeal to
this Court which stated in part:
1.
Canada Customs and Revenue Agency (CCRA) has assessed GST under
subsection 323(4) of the Excise Tax Act more than two years
after I ceased to be a director of Albertan Homes Ltd., and
the assessment is therefore statute barred by the provisions of
subsection 323(5) of the Excise Tax Act.
2.
CCRA claims that I am still a director of Albertan Homes Ltd.,
and has used insufficient and inaccurate information in making
the assessment, viz. an inaccurate computer print out,
Corporation Profile Report, provided by the Ontario Ministry of
Consumer and Commercial Relations.
. . .
B.
Statement of Relevant Facts in Support of the Appeal
1.
I sold [gave] all of my shares in Albertan Homes Ltd. on
January 1, 1995 to one Joe Bastos, a local lawyer. I
ceased to be a director of Albertan Homes Ltd. on January 1,
1995, at which time I submitted my resignation as a director of
the corporation in full compliance with the relevant statutes. My
resignation was dutifully recorded in the minutes of the
corporation. I attach (see Exhibit A) a letter from
Joe Bastos dated January 12, 2000, to which he attached a
copy of my resignation that is in the Minute Book of the
corporation. This resignation is clearly dated January 1,
1995. . . .
[3]
In so assessing the Appellant, the Minister made the following
assumptions of fact. The Appellant accepted (a), (b), (d), (h),
(i), (j), (k), (l), (m) and denied (e), (f), (g), (n), (o),
(p):
(a)
Albertan Homes Ltd. (the Corporation) registered under Part IX of
the Act effective January 1, 1991 and was assigned
registration number 124049271;
(b)
on May 25, 1995, the Companies Branch of the Ministry of Consumer
and Commercial Relations of Ontario cancelled the
Corporation's Charter;
(c)
the Appellant did not cease to be a director of the Corporation
upon cancellation of the Corporation's Charter referred to in
subparagraph (b) above;
(d)
the Corporation was revived on May 13, 1997;
(e)
as of November 30, 1999, the Appellant was still listed as
director of the Corporation;
(f)
the Appellant never resigned as director of the Corporation;
(g)
at all material times, the Appellant was a director of the
Corporation;
(h)
at all material times, the Corporation was required to file GST
returns on a quarterly basis and had a business year end of
December 31 for GST purposes;
(i)
at all material times, the Corporation was required to collect
and remit GST in accordance with subsection 225(1) of the
Act;
(j)
pursuant to subsection 222(1) of the Act, the amounts
collected on account of the net GST are deemed to be amounts held
in trust for Her Majesty until they are remitted to the Receiver
General;
(k)
the Corporation's net tax for the reporting periods starting
April 1, 1991 to March 31, 1992, as defined in
subsection 225(1) of the Act is $15,975.49;
(l)
a certificate for the amount of the Corporation's liability
has been registered in the Federal Court pursuant to section 316
of the Act and has been returned unsatisfied in whole or
in part;
(m) the
Corporation failed to remit the amount of $15,975.49 in
paragraph (f) as required by the Act;
(n)
as director of the Corporation, the Appellant did not take steps
to ensure that GST remittances were being made as required;
(o)
as director of the Corporation, the Appellant failed to prevent
the Corporation from using this trust money for other
purposes;
(p)
the Appellant, in his capacity as director of the corporation,
did not exercise the degree of care, diligence and skill to
prevent the Corporation's failure to remit the said amount
that a reasonably prudent person would have exercised in
comparable circumstances.
ISSUE
[4]
The issue to be decided is whether the Appellant is liable under
subsection 323(1) of the Act for failure by the
Corporation to remit to the Receiver General an amount of net tax
as required by subsection 225(1) of the Act, and the
penalty and interest relating thereto.
THE ASSESSMENTS
[5]
The Corporation was assessed on July 6, 1995.
[6]
The Corporation was reassessed on January 14, 1996. The appeal to
the Tax Court of Canada against this assessment was dismissed on
September 28, 1998. The Appellant was assessed as a director
in relation to the corporate assessment on February 17, 1998.
SIGNIFICANT EVIDENCE
DUE DILIGENCE
[7]
With respect to GST compliance, the evidence of the Appellant was
brief and not detailed. The Appellant stated he was a carpenter
and not a bookkeeper.
[8]
The Appellant stated that on behalf of the Corporation he should
have collected the GST but did not do so. He said he put in place
procedures to ensure GST compliance including the hiring of
additional staff. No other monitoring steps or compliance efforts
were tendered in evidence.
THE RESIGNATION
[9]
The Corporation was incorporated on October 24, 1990. The
Appellant was an originating director.
[10] In
relation to the purported resignation as a director, the evidence
was cursory and contradictory. The Appellant stated he resigned
as a director on January 1, 1995. This resignation letter
was filed with the Court with the Notice of Appeal and also filed
with Exhibit A-1. It reads:
Re: Albertan Homes Ltd.
I Kenneth Gordon Albertan hereby tender by resignation as an
officer and director of the corporation.
Dated at Kingston, this 1st day of January, 1995.
"Kenneth Gordon Albertan"
Kenneth Gordon Albertan
At that time the Corporation was insolvent. He said he sent
the resignation and his ten shares with the minute book to a
Mr. Bastos' legal office. He stated he gave these
documents to Mr. Bastos without any consideration. On
cross-examination, the Appellant could not remember when he took
the Corporation documents to Mr. Bastos other than sometime
in early 1995. He could not remember if he put the resignation in
the Corporation minute book. Although he said he severed his
connection with the Corporation after the spring of 1995 he
continued to act on behalf of Albertan Homes Ltd. in relation to
the GST corporate assessment and indeed he appeared on behalf of
the Corporation as an agent before the Tax Court of Canada on
September 28, 1998. The judgment from the Tax Court of Canada
states "The Agent for the Appellant" (the Appellant in
this case) "informed the Court orally that the Appellant
(the Corporation) was withdrawing its appeal herein."
[11] In a
Notice of Objection (Exhibit R-3 to this proceeding) the
Appellant stated: "I last ceased to be a director on the
20th May 1998[1]".
[12] Exhibit
A-3, a letter from the Canada Customs and Revenue Agency (the
"CCRA") dated February 9, 2000 to the Appellant,
had enclosed a Report on Objection by CCRA that stated as
follows: "Mr. Albertan's representative claims he
ceased being a Director of the Corporation on May 20, 1995,
... Mr. Albertan's representative is stating that
Mr. Albertan sold the business in May 1995."
[13] Also, on
cross-examination, Mr. Albertan was presented with
Exhibit R-1. This document was a letter dated December 3,
1999 from the Appellant to Norma Jean Wooley, GST
Appeals, stating "Attached is a copy of the letter of
resignation." The copy is on Albertan Homes letterhead, is
dated January 1, 1995 and reads:
I hereby resign as director of Albertan Homes Ltd. effective
January 1, 1995.
Signed
"Ken Albertan"
Ken Albertan
1 January 1995
Date
The Appellant stated this was prepared and signed by himself
in 1999 to comply with the CCRA request for the resignation.
[15] The
effective date of the purported resignation is also clouded by
several Ontario Corporate Profile Reports. Exhibit A-2 indicates
“Tina Marie Bastos” commenced to be a director
“1995/01/01” (production date of the profile was
“1999/11/30”). Exhibit R-2 indicates “Tina
Marie Bastos” commenced to be a director
“1995/05/20” (production date of the profile was
“1999/11/30”). Exhibit R-2 also indicates
“Kenneth Gordon Albertan” commenced to be a director
“1990/10/24” (production date of the profile was
“1999/11/30”).
[16] Further
confusion arises with Exhibit A-4, an unsigned and undated
Ontario Corporation Form 1 that indicates “Tina Marie
Bastos” was elected a director 1995/05/20 and that
“Albertan Kenneth Gordon” was no longer a director or
officer. This Form and the Schedule attached to it was required
to be certified by either an officer or director of the
Corporation. The document was not so certified.
CONCLUSION
[17] The
Appellant has the onus to show the purported resignation was
given and effective and was of a precise date. He has not done
so. The conflict between the dates (January 1, 1995 letter of
resignation and the May 20, 1995 Notice of Objection) was not
resolved. His issuance and production of a different form and
content copy of the resignation on a letterhead of Albertan Homes
signed (Exhibit R-1) and back-dated without any explanation
on its face causes this Court concern. Further, the corporate
profile report (Exhibit R-2) that indicates Kenneth
Gordon Albertan as of 1999/11/30 was still a director of the
Corporation has not been fully clarified or explained. Moreover
the Appellant’s authoritative representations to government
and this Court on behalf of the Corporation with respect to the
corporate assessment well after his purported resignation and
purported separation from the Corporation is confusing and not
resolved. Indeed this activity by the Appellant leads to an
inference the Appellant if not a director was acting as a deemed
or defacto director.
[18] The
Appellant could have subpoenaed as a witness the stated recipient
of the Corporation, Mr. Bastos, who may have been able to shed
some light on the purported resignation and the continuing
representation on behalf of the Corporation by the Appellant to
government and before this Court. The Appellant also could have
subpoenaed Tina Marie Bastos who appears in the corporate profile
reports as a director. Unfortunately neither of the Bastos gave
evidence.
[19] The
conclusion is that many key assumptions of the Minister have not
been dislodged. I further conclude in particular, the assumption
at all material times, the Appellant was a director of the
Corporation is unassailed.
[20] As a
director, the Appellant did not take steps to ensure that GST
remittances were being made as required. The Appellant in his
capacity as director of the Corporation did not exercise the
degree of care, diligence and skill to prevent the
Corporation's failure to remit the said amount that a
reasonably prudent person would have exercised in comparable
circumstances.
[21] The
Appellant's alternative argument is that the condition
precedent in paragraph 323(2)(b)[2] of the Act prevents the
Minister from assessing him under subsection 323(1) as the
Corporation had been dissolved under subsection 241(4) of
the Ontario Business Corporations Act[3] (the "OBCA").
On May 13, 1997, the Corporation was revived under
subsection 241(5) of the OBCA which provides that the
Corporation regains all rights and liabilities "to the same
extent as if it had not been dissolved". The Appellant was
assessed personally as a director on February 17, 1998,
subsequent to the said revival. Moreover, in Alton Renaissance
I et al. v. Talamanca Management Ltd. et al.,[4] Sheard J. pointed out that a
"dissolution" under subsection 241(4) of the
OBCA does not "have the finality that the word
suggests" and he rather described the Corporation as being
'suspended, rather than dissolved'."
[22] The
Appellant can therefore not rely as a defence on
paragraph 323(2)(b) of the Act which suggests
that the Corporation has commenced liquidation or dissolution
proceedings. Such proceedings have not been commenced in the
present appeal, nor has a liquidator been appointed to which the
Minister could have proven his claim.[5] Since the limitation period in
paragraph 323(2)(b) does not apply to the facts of
this case, the Appellant has clearly not acquired any
post-dissolution rights as a result of the so-called
"dissolution". The assessment against the Appellant was
within the statutory limitation period.
DECISION
[23] The
Appellant has not met the onus imposed upon him. The appeal is
dismissed.
Signed at Ottawa, Canada, this 10th day of May 2001.
"D. Hamlyn"
J.T.C.C.
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