Date: 20021122
Docket: A-371-01
Neutral citation: 2002 FCA 466
CORAM: LINDEN J.A.
SEXTON J.A.
SHARLOW J.A.
BETWEEN:
ATTORNEY GENERAL OF CANADA
Applicant
- and -
NICOLA DILORENZO
Respondent
Heard at Toronto, Ontario, on Monday, November 18, 2002.
Judgment delivered from the Bench at Toronto, Ontario, on Monday, November 18, 2002.
REASONS FOR JUDGMENT OF THE COURT: SEXTON J.A.
Date: 20021122
Docket: A-371-01
Neutral citation: 2002 FCA 466
CORAM: LINDEN J.A.
SEXTON J.A.
SHARLOW J.A.
BETWEEN:
ATTORNEY GENERAL OF CANADA
Applicant
- and -
NICOLA DILORENZO
Respondent
REASONS FOR JUDGMENT OF THE COURT
(Delivered from the Bench at Toronto, Ontario,
on Monday, November 18, 2002)
SEXTON J.A.
[1] This is an application by the Attorney General of Canada for judicial review of a decision by the Tax Court in which the Tax Court Judge concluded that the Respondent had made out the defence of due diligence to the charge that he was liable as a director of 819636 Ontario Inc. ("the Corporation") for unremitted goods and services tax ("GST") for certain periods of time in 1993 and 1994.
[2] The essence of the Applicant's first argument was that the Tax Court Judge erred in holding that the defence of due diligence had been made out because of the steps which the Respondent could have taken in order to make sure that the taxes in question were paid.
[3] It was also argued that the Respondent ought to have known that the Corporation would inevitably default in meeting its GST obligations and that the Tax Court Judge failed to address his mind to the question of the constructive knowledge of the Respondent.
[4] The answer to these arguments lies in the level of knowledge, skill and experience which the Respondent possessed. In the present case, the evidence was that the Appellant lacked any formal education, having started to work in the construction industry at age sixteen after having immigrated to Canada from Italy. His evidence was that he had never gotten involved in paperwork but hired accountants, lawyers and office workers because of his lack of expertise and because he was involved in managing the outside construction work. It is appropriate for the Court to take into account the level of skill, experience and qualifications of the individual sought to be held liable. In these circumstances, we are unable to find any error in the finding by the Tax Court Judge that the defence of due diligence was made out nor do we accept the argument that he applied the wrong test or made any other error of law in reaching his conclusion on this point.
[5] The Applicant further argued that a director cannot abdicate his responsibilities to a surrogate and then avoid liability when the surrogate is negligent or incompetent. It was argued by the Applicant that the accountant for the Corporation was negligent and that the Respondent was vicariously liable. Incompetence or negligence of the accountant in the present case was not an argument which was either pleaded or argued before the Tax Court Judge. We are not prepared on the basis of the Record before us to reach any conclusion as to the competence or negligence of the accountant.
[6] In any event, in the present case, the Tax Court Judge found that it was not unreasonable for the Respondent to rely on the expertise of the accountant retained by the Corporation. He further held that an important factor was that the Respondent had no control over payment of the accounts of the Corporation, the control of which had been taken over by a creditor of the Corporation. Because the Respondent had no control over this, then neither did the accountant.
[7] Nor did the Tax Court Judge accept that the Respondent had abdicated his responsibilities as a director.
[8] In these circumstances, we are unable to conclude that the Tax Court Judge made any palpable or overriding error in his conclusions as to the facts in this case. The finding of the Tax Court Judge as to the defence of due diligence is essentially driven by his findings of fact.
[9] Nothing in the reasons of the Tax Court Judge or in these reasons should be taken as saying that directors may abdicate their responsibilities under s. 323 of the Excise Tax Act, or as derogating from the principles set out in the cases of Soper v. The Queen, 97 D.T.C. 5407 (F.C.A.) and Worrell v. The Queen, 2000 D.T.C. 6593 (F.C.A.).
[10] The application will therefore be dismissed with costs.
"J. E. Sexton"
J.A.
FEDERAL COURT OF CANADA
APPEAL DIVISION
Names of Counsel and Solicitors of Record
DOCKET: A-371-01
STYLE OF CAUSE: THE ATTORNEY GENERAL OF CANADA
Applicant
- and -
NICOLA DILORENZO
Respondent
DATE OF HEARING: MONDAY, NOVEMBER 18, 2002
PLACE OF HEARING: TORONTO, ONTARIO
REASONS FOR JUDGMENT BY:SEXTON, J.A.
DATED: FRIDAY, NOVEMBER 22, 2002
DELIVERED FROM THE BENCH AT TORONTO, ONTARIO ON MONDAY, NOVEMBER 18, 2002.
APPEARANCES BY: Ms. Marie Therese Boris
Mr. Michael Ezri
For the Applicant
Mr. Mauro Marchioni
For the Respondent
SOLICITORS OF RECORD: Morris Rosenberg
Deputy Attorney General of Canada
For the Applicant
Mauro Marchioni
8400 Jane St.
Suite 300
Vaughan, Ontario
L4K 4L8
For the Respondent
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