Date: 20090506
Docket: A-429-07
Citation: 2009 FCA 146
CORAM: LINDEN J.A.
SEXTON
J.A.
RYER
J.A.
BETWEEN:
CHARLES BREMNER
Appellant
and
HER MAJESTY THE QUEEN
Respondent
REASONS FOR JUDGMENT OF THE
COURT
(Delivered from the Bench at Toronto, Ontario, on May 6, 2009)
RYER J.A.
[1]
This is an appeal from a decision of Chief
Justice Rip of the Tax Court of Canada (2007 TCC 509) dismissing the appeal of
Mr. Charles Bremner (the “appellant”) from an assessment, dated October 1,
2002, that was issued to him pursuant to subsection 323(4) of the Excise Tax
Act, R.S.C. 1985, c. E-15 (the “ETA”). Under the assessment, the appellant
became liable to pay an outstanding liability of Excel Highway Support Service
Inc. (the “Corporation”) for unremitted goods and services tax (“GST”), and
related interest and penalties, in respect of the period from March 1, 1999 to
May 31, 2000.
[2]
Subsection 323(1) of the ETA imposes joint and
several liability on the directors of a corporation at the time it fails to
remit certain amounts specified in that provision. The Minister may assess
directors, pursuant to subsection 323(4) of the ETA, for any amount payable by
them pursuant to subsection 323(1) of the ETA. Subsection 323(5) of the ETA
provides an important limitation on the Minister’s assessing power. The
assessment cannot be levied against a person more than two years after that
person last ceased to be a director of the corporation. These provisions of the
ETA are reproduced in the appendix to these reasons.
[3]
The
appellant admitted that he became a deemed director of the Corporation (a
“deemed director”), pursuant to subsection 115(4) of the Ontario Business Corporations Act,
R.S.O. 1990, c. B.16 (the “BCA”), as a consequence of his engagement in the
management of the business and affairs of the Corporation after his wife
resigned as the sole director of the Corporation in 1997 and the Corporation
failed to appoint or elect a replacement director. That provision is also
reproduced in the appendix to these reasons.
[4]
Before the
Tax Court of Canada, the appellant argued that he ceased to be a deemed
director of the Corporation in September of 2000, when the business operations
of the Corporation terminated. As a result, he argued that the assessment,
which was issued on October 1, 2002, was invalid, by virtue of subsection
323(5) of the ETA, because it was issued outside the two year period that
commenced on the date that he ceased to be a director of the Corporation.
[5]
The Tax
Court Judge accepted the appellant’s admission that he was a deemed director of
the Corporation from the time of his wife’s resignation as a director of the
Corporation but did not agree with the appellant’s argument that he ceased to
be a director of the Corporation in September of 2000. Instead, the Tax Court
Judge found that the appellant’s engagement in the management of the
Corporation continued until at least April 10, 2001, the date of a letter that
the appellant wrote to the Canada Customs and Revenue Agency (the “CCRA”), as
it was then known, in response to a letter it wrote. In his letter to the CCRA,
the appellant requested that future correspondence from the CCRA should be sent
to him, and not to his wife.
[6]
The Tax
Court Judge found that in corresponding with the CCRA, the appellant
demonstrated that he was still managing the actions of the Corporation, however
minimal those actions may have been.
[7]
In our
view, this finding is unassailable and is sufficient to dispose of the appeal,
since it establishes that the two year limitation period for the assessment
would not expire before April of 2003, a date subsequent to October 1, 2002,
the date of the assessment.
[8]
While no authority was provided to the Court with
respect to the interpretation of subsection 115(4) of the BCA, the language of
that provision supports the conclusion that the directorship of a person that
arises by virtue of that provision must be considered to endure at least as
long as that person manages or supervises the management of the business and
affairs of the corporation in question.
[9]
The Tax
Court Judge found that by virtue of his having written the April 10, 2001
letter to the CCRA, the appellant engaged in the management of the business and
affairs of the Corporation on that date. This factual finding was open to the
Tax Court Judge and in making this finding, we are not persuaded that he
committed a palpable and overriding error. While the appellant contends that
this letter was written on behalf of his wife, this contention is not supported
by the record. In fact, in testimony given in the Tax Court of Canada, the
appellant stated that he was a director of the Corporation when he wrote that
letter. It follows that the appellant was a deemed director of the Corporation
on April 10, 2001, and consequently, the two year limitation period in
subsection 323(5) of the ETA does not protect the appellant from liability
under the assessment.
[10]
For the foregoing reasons, the appeal will be
dismissed but without costs because of the failure of counsel for the Minister
to appear at the hearing.
“C.
Michael Ryer”
APPENDIX
Subsections
323(1), (4) and (5) of the Excise Tax Act, R.S.C.
1985, c. E-15
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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.
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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.
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(4) The
Minister may assess any person for any amount payable by the person under
this section and, where the Minister sends a notice of assessment, sections
296 to 311 apply, with such modifications as the circumstances require.
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(4) Le ministre
peut établir une cotisation pour un montant payable par une personne aux
termes du présent article. Les articles 296 à 311 s’appliquent, compte tenu
des adaptations de circonstance, dès que le ministre envoie l’avis de
cotisation applicable.
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(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.
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(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.
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Subsection
115(4) of the Business Corporations Act, R.S.O. 1990, c. B.16
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(4) Where all of the directors
have resigned or have been removed by the shareholders without replacement,
any person who manages or supervises the management of the business and
affairs of the corporation shall be deemed to be a director for the purposes
of this Act. 1994, c. 27, s. 71 (12).
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(4) Si tous les administrateurs démissionnent ou sont
destitués par les actionnaires sans être remplacés, quiconque dirige ou
supervise les activités commerciales et les affaires internes de la société
est réputé un administrateur pour l’application de la présente loi. 1994,
chap. 27, par. 71 (12).
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FEDERAL COURT OF APPEAL
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: A-429-07
(AN APPEAL FROM THE ORDER OF THE
HONOURABLE MR. CHIEF JUSTICE GERALD J. RIP, OF THE TAX COURT, DATED AUGUST 28,
2008, IN TAXCOURT DOCKET NO. 2004-1135 (GST) I.)
STYLE OF CAUSE: CHARLES BREMNER v. HER MAJESTY THE QUEEN
PLACE OF HEARING: TORONTO, ONTARIO
DATE OF HEARING: MAY 6, 2009
REASONS FOR JUDGMENT OF THE COURT BY: (LINDEN, SEXTON & RYER JJ.A.)
DELIVERED FROM THE BENCH BY: RYER J.A.
APPEARANCES:
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Mr. Nigel
Schilling, Q.C.
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FOR THE APPELLANT
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No Appearance
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FOR THE RESPONDENT
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SOLICITORS OF RECORD:
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Schilling, Evans
Barristers & Solicitors
Whitby, ON
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FOR THE
APPELLANT
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John H. Sims, Q.C.
Deputy Attorney General of Canada
Toronto, ON
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FOR THE
RESPONDENT
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