Date:
20120203
Docket: A-183-10
Citation: 2012 FCA 38
CORAM: EVANS
J.A.
SHARLOW
J.A.
STRATAS
J.A.
BETWEEN:
RALPH DONCASTER
Appellant
and
HER MAJESTY
THE QUEEN
Respondent
REASONS FOR
JUDGMENT
SHARLOW J.A.
[1]
The
appellant Ralph Doncaster is appealing the judgment of the Tax Court of Canada
dated April 8, 2010 (Doncaster v. Canada, 2010 TCC 190). The judgment
dismissed Mr. Doncaster’s appeal of an assessment made under Part IX of the Excise
Tax Act, R.S.C. 1985, c. E-15, for goods and services tax (GST) in the
amount of $93,550.97. The basis of the assessment was that, from January 1,
1999 to June 6, 2005, Mr. Doncaster was a director of a corporation named
Doncaster Consulting Inc. that collected GST during that period and failed to
remit it. Doncaster Consulting Inc. became bankrupt on June 6, 2005.
Section 323
of the Excise Tax Act – directors’ liability
[2]
The
statutory authority for the assessment under appeal is section 323 of the Excise
Tax Act, the relevant portions of which read as follows:
|
323. (1) If a corporation fails
to remit an amount of net tax as required under subsection 228(2) or (2.3) or
to pay an amount as required under section 230.1 that was paid to, or was
applied to the liability of, the corporation as a net tax refund, the
directors of the corporation at the time the corporation was required to
remit or pay, as the case may be, the amount are jointly and severally, or
solidarily, liable, together with the corporation, to pay the amount and any
interest on, or penalties relating to, the amount.
|
323. (1) Les administrateurs
d’une personne morale au moment où elle était tenue de verser, comme
l’exigent les paragraphes 228(2) ou (2.3), un montant de taxe nette ou, comme
l’exige l’article 230.1, un montant au titre d’un remboursement de taxe nette
qui lui a été payé ou qui a été déduit d’une somme dont elle est redevable,
sont, en cas de défaut par la personne morale, solidairement tenus, avec
cette dernière, de payer le montant ainsi que les intérêts et pénalités
afférents.
|
|
(2) A director of a corporation is not
liable under subsection (1) unless
…
(c)
the corporation has made an assignment or a bankruptcy order has been made
against it under the Bankruptcy and Insolvency Act and a claim for the
amount of the corporation’s liability referred to in subsection (1) has been
proved within six months after the date of the assignment or bankruptcy
order.
|
(2)
L’administrateur n’encourt de responsabilité selon le paragraphe (1) que si :
[…]
c) la personne morale a fait
une cession, ou une ordonnance de faillite a été rendue contre elle en
application de la Loi sur la faillite et l’insolvabilité, et une
réclamation de la somme pour laquelle elle est responsable a été établie dans
les six mois suivant la cession ou l’ordonnance.
|
|
(3) A director of a corporation is not
liable for a failure under subsection (1) where the director exercised the
degree of care, diligence and skill to prevent the failure that a reasonably
prudent
person
would have exercised in comparable circumstances.
|
(3)
L’administrateur n’encourt pas de responsabilité s’il a agi avec autant de
soin, de diligence et de compétence pour prévenir le manquement visé au
paragraphe (1) que ne l’aurait fait une
personne
raisonnablement prudente dans les mêmes circonstances.
|
|
…
|
[…]
|
|
(5) An assessment under subsection (4)
of any amount payable by a person who is a director of a corporation shall
not be made more than two years after the person last ceased to be a director
of the corporation.
|
(5)
L’établissement d’une telle cotisation pour un montant payable par un administrateur
se prescrit par deux ans après qu’il a cessé pour la dernière fois d’être
administrateur.
|
Proceedings in the Tax
Court
[3]
Mr.
Doncaster’s appeal in the Tax Court was conducted under the informal procedure
rules of that Court. Mr. Doncaster represented himself. His appeal was based on
a number of grounds, none of which were accepted by the Tax Court judge.
Grounds for
appeal
[4]
In
his notice of appeal in this Court, and in his written submissions, Mr.
Doncaster has again raised a number of grounds of appeal. However, it became
apparent in the course of oral argument that Mr. Doncaster also had a further
ground of appeal, which is that he was unfairly deprived of a chance to produce
evidence that might prove that the assessment was wrong.
[5]
Given
the unusual manner in which this new ground of appeal was revealed, and that
Mr. Doncaster was self represented, the Court concluded that this new issue
should be fully considered. Therefore, the parties were requested to make
supplementary submissions on the new ground of appeal, which they have done.
Those submissions have now been considered.
[6]
For
the reasons that follow, I have concluded that this ground of appeal is a
sufficient basis for allowing this appeal and ordering a new hearing before a
different judge.
Discussion
[7]
Generally,
a decision by a trial judge to grant or refuse an adjournment is an exercise of
discretion that will not be disturbed on appeal unless the decision is based on
an error in principle, or the discretion is not exercised judicially. Useful
guidance on the appellate review of a decision to refuse an adjournment is
found in Donald J.M Brown Q.C., Civil Appeals, looseleaf (Toronto:
Canvasback Publishing, 2011) at 12:2111 (footnotes omitted):
As with all procedural and structural decisions, the
fundamental objective in determining whether to grant an adjournment involves
its impact on the fairness of the trial. Accordingly, the effect of a refusal
to adjourn on the ability of a party to present both its evidence and argument
is weighed against the prejudice that might result should an adjournment be
granted. So in the absence of overriding implications for the administration of
justice or irremediable prejudice to the parties opposing the adjournment,
where the denial of an adjournment materially affects the ability of a party
effectively to present its proofs and arguments, either a new trial will be
ordered, or an appellate court may decide the matter afresh.
[8]
I
summarize as follows the facts that are relevant to this new ground of appeal.
The amount of the GST liability for which the Minister considered Doncaster
Consulting Inc. to be liable, and for which Mr. Doncaster was assessed, is
based on the work of officials of the Canada Revenue Agency. This is explained
by the Tax Court judge as follows at paragraphs 27 to 32:
|
[27] The [Crown]
called Greg Scott Wright who has been a trust examiner for twelve years and
before that was a collections officer for seven years. He attempted to do an
examination of the business of [Doncaster Consulting Inc.] without success.
[Mr. Doncaster] would not meet with him.
[28] A
computer-generated notional assessment was recommended. The file was then
sent to collections. In cross-examination [Mr. Wright] said that when
notional assessments are done no input tax credits are given as it is up to
the taxpayer to prove them. He was responsible for the spreadsheet.
[29] Gilles Jules Chartrand was a trust account examiner
with Canada Revenue Agency. He had twenty-five years experience. He did the
bankruptcy examination for [Doncaster Consulting Inc.] here. This can be seen
at Tab 8 of Exhibit R-1.
[30] There were nineteen outstanding returns for G.S.T.
by [Doncaster Consulting Inc.] from January 6, 1985 to January 1, 1999. He
received five of the returns from the [trustee in bankruptcy]. The remainder
were “nil returns”.
[31] [Mr. Chartrand] went to the Trustee’s office and
then to [Mr. Doncaster’s] residence. He received one box of supposed records.
These were mostly invoices dealing with cost of goods sold to the Company and
had nothing to do with the Company’s G.S.T. collected on sales. He gave these
documents to the Trustee in September of 2005. He picked up five returns and
gave the information to the Trustee to prepare the returns as seen in Tab 12
of Exhibit R-1. They processed the fourteen remaining returns as zero.
Collections filed a Proof of Claim with the Trustee on the basis of his
results.
[32] In cross-examination [Mr. Chartrand] said that he
examined the bank statements provided by the Trustee. The sales were based
upon the bank deposits. There was no other information provided.
|
[9]
The
quoted excerpt also explains that Mr. Doncaster gave Mr. Chartrand a box of
corporate documents relating to the financial transactions of Doncaster
Consulting Inc., and that Mr. Chartrand gave those documents to the trustee in
bankruptcy. According to Mr. Doncaster, the documents may have included
invoices for amounts owed by Doncaster Consulting Inc. to its suppliers. Mr.
Doncaster argued in the Tax Court, and in this Court, that those invoices would
have showed amounts that could form the basis of a valid claim for input tax
credits that would have reduced the GST liability of Doncaster Consulting Inc.
No input tax credits had previously been claimed.
[10]
It
appears that the business of Doncaster Consulting Inc. was acquiring “wholesale
internet services” from Bell Nexxia and selling those services to retail
customers. It is reasonable to infer that any liability incurred by Doncaster
Consulting Inc. in relation to GST collected from its customers would have been
partially offset by input tax credits arising from GST that Bell Nexxia would
have charged to Doncaster Consulting Inc.
[11]
Mr.
Doncaster was aware that he bore the onus of establishing that the amount of
the assessment was incorrect. He could do that only by obtaining the required
documents, or copies of them, from the trustee in bankruptcy. The record
indicates that Mr. Doncaster was aware that this would require serving a
subpoena to the trustee in bankruptcy. However, his uncontradicted evidence is
that the trustee in bankruptcy told him that no subpoena would be honoured
unless the trustee in bankruptcy was paid substantial fees. Mr. Doncaster
apparently believed what he was told.
[12]
At
the Tax Court hearing, the problem of the subpoena was discussed. The Tax Court
judge explained to Mr. Doncaster that the trustee in bankruptcy would have been
obliged to honour the subpoena if the appropriate travel costs were tendered,
but he could not refuse to appear on the basis of any failure on the part of
Mr. Doncaster to pay him professional fees. However, even though it is clear
that Mr. Doncaster had been misinformed by the trustee in bankruptcy and that
the Tax Court judge was made aware of that fact, the Tax Court judge refused
Mr. Doncaster’s request to adjourn the proceedings to enable Mr. Doncaster to
serve the necessary subpoenas.
[13]
I
can understand the reluctance of a judge to grant an adjournment request that
arises near the end of the hearing. However, in my respectful view, in the
particular circumstances of this case, the refusal of the Tax Court judge to
adjourn the Tax Court proceeding to enable Mr. Doncaster to take steps to
obtain the documents was an improper exercise of discretion because it denied
Mr. Doncaster a fair opportunity to produce potentially relevant evidence.
[14]
I
reach that conclusion because it is apparent from the record that Mr. Doncaster
made considerable and largely successful efforts to inform himself about his
obligations as an appellant. It is true that his approach was somewhat
disorganized and to some extent his early failures to meet with Canada Revenue
Agency officials may have caused or contributed to his difficulties. However,
the documents in question were potentially of central importance to Mr.
Doncaster, and the Tax Court judge was aware that Mr. Doncaster incorrectly
believed that they were out of his reach because he had been misinformed by the
trustee in bankruptcy. And, in the circumstances of this case, the Crown cannot
be prejudiced by the possibility that Mr. Doncaster may discover proof that
Doncaster Consulting Inc. is entitled to input tax credits.
[15]
Given
my conclusions on this ground of appeal, I need not consider Mr. Doncaster’s
other grounds of appeal. I will mention, however, that some of those grounds of
appeal relate to evidence that Mr. Doncaster attempted without success to
adduce. The judge who is assigned to rehear this case will be required to
consider the admissibility of any evidence tendered by Mr. Doncaster, whether
or not that evidence was tendered or rejected at the first hearing.
Motion to
present evidence on appeal
[16]
Mr.
Doncaster has moved to present evidence on appeal. The motion was argued and
the decision was reserved pending consideration of the merits of the appeal.
[17]
The
test for accepting evidence on appeal is well established. It was recently
restated by Justice Noël, speaking for this Court in General
Electric Capital Canada Inc. v. Canada, 2010 FCA 290, at paragraph
3:
|
New evidence may exceptionally be presented on appeal if it can be shown
that it could not have been discovered before the end of the trial, and that
it is otherwise credible and practically conclusive of an issue on appeal:
see Amchem Products Inc. v. British Columbia (Worker’s Compensation Board),
[1992] S.C.J. No. 110, 192 N.R. 390 at paragraph 6 (Amchem); and Franck
Brunckhorst Co. v. Gainers Inc. et al., [1993] F.C.J. No. 874 (C.A.) at
paragraph 2.
|
[18]
Mr.
Doncaster seeks to present as new evidence his own affidavit that is intended
to establish that in August of 2011, he was diagnosed for the first time with
attention deficit hyperactivity disorder (ADHD). Mr. Doncaster explains that
this disorder is characterized by distractibility, a short temper,
procrastination, and difficulty focussing, and that he has suffered from this
condition for many years although he only recently came to recognize it and
seek medical assistance. He argues that this evidence is relevant, and may
well be conclusive, with regard to his defence of due diligence.
[19]
The
affidavit submitted by Mr. Doncaster is problematic in many respects. It is not
supported by the affidavit or expert opinion of a medical practitioner as to
Mr. Doncaster’s diagnosis, the likelihood that he suffered from ADHD during the
relevant period (1999 to 2005), or whether ADHD affected or could have affected
him during that period in a manner that is relevant to a due diligence defence.
For that reason, it is not possible to conclude that the affidavit sought to be
adduced in this appeal is practically conclusive of an issue on appeal. That is
a sufficient basis for dismissing the motion to present evidence on appeal.
[20]
However,
it is open to Mr. Doncaster, at the new hearing in the Tax Court, to present
evidence on this point. The judge at the new hearing will be obliged to
consider the admissibility and relevance of any such evidence.
Conclusion
[21]
For
these reasons, I would allow Mr. Doncaster’s appeal with costs, set aside the
Tax Court judgment, and return this matter to the Tax Court for rehearing by a
different judge.
“K.
Sharlow”
“I
agree
John M. Evans J.A.”
“I
agree
David Stratas J.A.”
Email this Content