Docket: 2010-1210(GST)G
BETWEEN:
DANIEL MARCOTTE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
[OFFICIAL ENGLISH TRANSLATION]
____________________________________________________________________
Appeal
heard on common evidence with the appeal in file
No. 2008-3789(GST)G on May 17, 2012, at Ottawa, Ontario.
Before: The Honourable Chief Justice Gerald
J. Rip
Appearances:
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Counsel for the Appellant
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Jean Faullem
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|
|
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Counsel for the Respondent:
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Gérald Danis
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____________________________________________________________________
JUDGMENT
The appeal from the reassessment made under
subsection 323(1) of Part IX of the Excise Tax Act, the notice of which
is dated July 16, 2008, and bears the number PH2008-045, is dismissed.
Signed at Ottawa, Canada, this 7th day of February 2013.
“Gerald J. Rip”
Translation certified true
on this 26th day of April 2013.
Erich Klein,
Revisor
Citation: 2013 TCC 49
Date: 20130207
Docket: 2010-1210(GST)G
BETWEEN:
DANIEL MARCOTTE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
[OFFICIAL ENGLISH
TRANSLATION]
REASONS FOR JUDGMENT
Rip C.J.
[1]
This appeal is related to
appeals involving the same parties dealt with in a previous decision of this Court
(2012 TCC 336). The reassessment is based on the same facts. In the
present case, Daniel Marcotte, director of 3634451 Canada Inc. (hereinafter
JORA), is appealing a reassessment made on July 16, 2008, under subsection
323(1) of the Excise Tax Act (ETA).
[2]
To briefly recount the
facts,
after negotiations with officials of Quebec’s Ministère du Revenu (Revenu
Québec), on August 8, 2004 JORA issued a $500,000 cheque to Revenu Québec in
payment of the balance of the net tax owed by JORA, give or take a few thousand
dollars. After splitting the amount of the cheque into two portions of $250,000
for goods and services tax (GST) and for Quebec sales tax (QST), Revenu Québec
allocated the total amount of the cheque to JORA’s account balance.
[3]
In October 2007, the
appellant entered into negotiations with Revenu Québec to change the way in
which the cheque issued by JORA on August 18, 2004, was allocated. As stated in
the letter dated October 12, 2007, from Jacques Plourde, a
representative of Revenu Québec, the parties agreed that the cheque issued by JORA
would be allocated as follows:
|
Gale Maloney
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$61,852.79
|
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Daniel Marcotte
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$285,975.38
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Guy Marcotte
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$38,564.21
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JORA
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$113,607.62
|
[4]
Ms. Maloney,
Daniel Marcotte and Guy Marcotte were shareholders or employees of JORA.
[5]
Following on the new
allocation, Revenu Québec retroactively adjusted JORA’s GST balance and issued
notices of reassessment against the appellant under sections 323 and 325 of the
ETA.
Issue
[6]
The issue in this
appeal is whether the appellant, as the director of JORA, is solidarily liable
with JORA for the net tax that JORA failed to remit to the Minister. More
specifically, the case concerns the appellant’s entitlement to rely on the due
diligence defence in subsection 323(3) of the ETA in order to avoid liability
as a director of JORA.
The appellant’s arguments
[7]
In his written
submissions, the appellant claims to have exercised the degree of care and
diligence to prevent the failure that a reasonably prudent person would have
exercised in comparable circumstances. More specifically, the appellant contends
that he did the self-assessment for JORA in accordance with the requirements of
the ETA and that, when he saw that there was a problem with respect to the
calculation the amount of net tax owed by JORA, he immediately contacted a
representative of Revenu Québec, Mr. Picard, to make sure that he was
meeting his obligations. According to the appellant, an agreement was reached
with Mr. Picard to treat five buildings constructed by JORA as a housing complex,
which would thus allow all the self-assessments concerning the five buildings to
be completed by December 31, 2004, without interest or penalties.
Since Revenu Québec denies the existence of such an agreement, the appellant
claims that he was misled by Mr. Picard, whom he had trusted.
[8]
The appellant points
out that the Court must, in its assessment of the due diligence defence, consider
in the light of the objective test set out by the Federal Court of Appeal in Canada
v. Buckingham, 2011 FCA 142, 2011 DTC 5078, the circumstances the appellant
found himself in during the period in question.
[9]
Last, the appellant
submits that the fact that JORA provided a cheque for $500,000 although no
notice of assessment had yet been issued is evidence of the appellant’s due
diligence. For all these reasons, the appellant submits that the exemption from
liability pursuant to subsection 323(3) of the ETA is available to him.
Respondent’s arguments
[10]
The respondent is of
the opinion that all of the requirements of subsection 323(2) of the ETA have
been met since a certificate and a writ of seizure were issued on April 7,
2008, and June 10, 2008, respectively, and the writ was executed without the
full amount of JORA’s tax debt being collected.
[11]
Relying on the pronouncements
of the Federal Court of Appeal in Buckingham (supra), the
respondent argues that the appellant’s negligence can be seen on two levels. First,
the respondent does not recognize the existence of an agreement between Mr.
Picard and the appellant. Consequently, the respondent maintains that the
appellant wilfully let the date for the mandatory filing of JORA’s net tax returns
pass. Accordingly, the filing of the New Residential Rental Property GST Rebate
Application forms on February 28, 2004, demonstrates the appellant’s voluntary failure
to remit JORA’s net tax within the prescribed time.
[12]
Second, the respondent contends
that the appellant, by requesting that the allocation of the payment of August
18, 2004, be amended, made a deliberate choice to pay his personal debt to the
detriment of JORA’s debt. Since JORA’s failure to remit resulted from the appellant’s
decision, the appellant cannot claim that he acted diligently to prevent the
failure contemplated in subsection 323(1) of the ETA.
Analysis
[13]
I agree with the
Minister’s position. An assessment under subsection 323(1) is against a person
who is a director of a corporation that owes net tax for one or more reporting
periods (or a refund overpayment or interest overpayment) and that has not
remitted that tax. An assessment under subsection 325(1) is against a
transferee of property who has received that property from a transferor who is
not at arms length and who, at the time of the transfer, owed net tax for one
or more reporting periods. In the appellant’s appeal from the assessment made under
subsection 325(1), I found that, at the time the transfer actually took
place, the transferor did not owe any net tax and that events subsequent to the
transfer that were not foreseen or reasonably foreseeable at the time of the
transfer should not result in the transferee’s liability under subsection 325(1).
[14]
The assessment made
under subsection 323(1) concerns the net tax owing for one or more reporting
periods. When a net tax amount for a reporting period is remitted to the
Receiver General by a taxpayer and the taxpayer subsequently allocates the
amount of the payment so as to benefit other persons, it cannot reasonably be argued
that the taxpayer paid an amount of net tax for a reporting period. Remitting
an amount and then withdrawing it does not constitute a payment.
[15]
I have considerable
difficulty accepting the appellant’s position that he exercised the degree of
care, diligence and skill to prevent JORA’s failure to meet its obligation to pay
that a reasonably prudent person would have exercised in comparable
circumstances: subsection 323(3). In this case, Mr. Marcotte is the one
who [Translation] “withdrew” the
tax amount that JORA had previously remitted to the Receiver General and who
directed that other people, including the appellant himself, should be credited
for the amount so remitted. The appellant acknowledged signing the tax
remittance cheques and stated that he took the time to review the supporting
documentation that his assistant brought him along with the cheques to be
signed. A reasonable businessman placed in the same circumstances would thus have
been aware of the extent of JORA’s tax obligations and would by virtue of that
fact have realized that amending the allocation of the payment would result in
the creation of a debt for JORA. In such circumstances, it would be absurd to
find that Mr. Marcotte acted diligently and that JORA paid an amount of net tax
for a reporting period. In the end, JORA remains liable to pay an amount to the
Crown for one or more reporting periods. Indeed, it is Mr. Marcotte who created
the situation that resulted in the revival of JORA’s debt.
[16]
The appeal is dismissed.
Signed at Ottawa, Canada, this 7th day of February 2013.
“Gerald J. Rip”
Translation certified true
on this 26th day of April 2013.
Erich Klein,
Revisor
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