Margery Irene Cordingley and John Dudley Cordingley v. Her Majesty the Queen, [1995] 1 CTC 2348, 94 DTC 1752

Teskey J.T.C.C.:—The Minister of National Revenue (the "Minister”), pursuant to subsection 161(2) to the Income Tax Act, R.S.C. 1952, c. 148 (am. S.C. 1970-71-72, c. 63) (the ’’Act”) assessed the sum of $63,673.88 for interest arising from the appellant’s alleged failure to make instalment payments as required by section 156 of the Act. In addition, the appellant was assessed a further sum of interest in the amount of $18,007.44, pursuant to subsection 161(1) of the Act, and also, pursuant to section 163.1 of the Act, the appellant was assessed a penalty in the amount of $18,879.45 arising from the appellant’s alleged failure to make instalment payments as required by section 156 of the Act.

Issue

The issue herein is whether the appellant delivered to Revenue Canada three postdated cheques dated June 15, 1990, September 15, 1990 and December 15, 1990, each in the amount of $212,700.

The appellant, pursuant to the provisions of section 156 of the Act, was required in the year 1990 to make four instalment payments of $212,700 each. the appellant did make the March 15, 1990 payment. The first witness for the appellant was Rosemarie Jean Harrison. She is the personal account manager at the Canadian Imperial Bank of Commerce (’’the CIBC”) in Milton where the appellant does all his banking. In 1990, she had known the appellant for some 15 years. I accept her evidence in full and find that in 1990, there were sufficient funds at all times during 1990 in the custody of the CIBC in Milton, so that all instalment cheques payable to the Receiver General of Canada would have been honoured on presentation.

The appellant owned a centennial farm, 1.e., a farm that was in the Cordingley name since Confederation. The farm was passed on to the appellant by his father in 1946. He farmed the property from that time until 1988. The farming operation was never very profitable. The appellant spent approximately 70 per cent of his time driving trucks. In 1988, he sold the farm for $31,000,000. The down payment was $10,000,000 and he took back a first mortgage for $21,000,000. A default occurred on the $21,000,000 mortgage in August 1990. A foreclosure action was commenced in the Ontario Court of Justice, General Division, which action was settled in 1991 for $18,000,000 cash.

In 1990, the vast majority of the $10,000,000 was in the hands of the CIBC in Milton.

I find as a fact, from the evidence adduced before me, that the appellant did make quarterly payments in 1989 and again in 1991.

Oral testimony was also given by the appellant, his wife Margery Irene Cordingley ("Margery”), Matthew Watford (’’Watford”), a certified general accountant, and his secretary, Gertrude Carr ("Carr"). On observing the appellant, his wife and Carr in the witness box, I am quite satisfied that all three were attempting to be as fair, honest and truthful as possible with the Court, and in no way attempting to either withhold or to give false testimony. Although the appellant at times was a little confused as to dates, the moment the proper dates were brought to his attention, all confusion cleared, and I accept his testimony. When comparing the testimony of the appellant and his wife against the testimony of Watford, I accept the testimony of either the appellant or his wife over that of the accountant. The accountant’s testimony is almost unbelievable. It conflicts in two very important areas. One with the appellant and one with the appellant’s wife.

Watford did not keep a running diary of when and who he saw, and what was done. No one asked him how he prepared his accounts for his clients, but it certainly could not be based on time. Both Carr and Watford kept diaries for the sole purpose of logging outside appointments. Some in-office appointments that were set up ahead of time, may also have been logged in these diaries. Clients walking into the office without appointments were not noted in either diary.

Watford gave evidence that, early in January 1990, he met with the appellant and got two blank cheques payable to the Receiver General of Canada each dated March 15, 1990, for the appellant and his wife’s quarterly instalment. He stated that at that time he did not know what the mounts should be and that the amounts would have to be filled in later when he had completed the 1989 TI tax return for both. He stated that he saw the appellant and his wife just prior to the March 15, and that is when six postdated cheques, three for the appellant and three for Margery, were filled out and left with him. He filled out the Revenue Canada forms for instalment payments and attached thereto the postdated cheques. In his evidence, he stated that the general office procedure was that either he or Carr would place postdated cheques in her diary or in an envelope, both of which were kept on her desk. He has no recollection of what he actually did with the six cheques. He stated that he had no knowledge that the cheques were not received by Revenue Canada and had not been cashed until the assessment arrived in his office in the summer of 1991, when the assessment for 1990 was received. He said "it hit him like a ton of bricks".

Both these pieces of evidence are in conflict. The appellant swore, and I accept his version of it and reject the evidence given by Watford, that he knew in January 1991 that only the March payment had been made and that Watford took the attitude "we will file the 1990 TI tax return as if paid and wait for the assessment". I accept the appellant’s testimony on this matter.

In regard to when the six cheques were signed, the evidence of Watford is in conflict with Margery’s evidence. Margery keeps detailed diaries. of all their trips. Her diary shows that in 1991 they left Ontario on January 7 and did not return until March 13. Her evidence is that after they got back to Ontario and home, they were out shopping and stopped by Watford’s office to sign their 1990 TI tax returns. While in the office signing the tax returns, the six cheques, that is three each for hers and her husband’s quarterly payments for June, September and December, were filled out and signed and left with Watford. The T1 tax returns for 1990 are both dated, (obviously with Margery’s writing thereon), March 30, 1991. I find as a fact that the six postdated cheques were in the proper amounts, properly dated, and given to Watford on that date. Carr has no recollection of these six cheques and stated that they only sent cheques to Revenue Canada quarterly. When asked about the amount of cheques that were sent to Revenue Canada, the answer was "an inch and a half to two inches of cheques were mailed quarterly to Revenue Canada". Although there is no evidence before me other than a registered receipt showing something was sent to Revenue Canada on March 15, 1990, I am asked to make a finding on the basis of general office procedures that the six cheques left with Watford on March 30, 1991, somehow got into an envelope on the June 15, which envelope may have been mailed by registered mail and sent to Revenue Canada.

Other than office policy, there is no evidence before me, that in fact the cheques were sent by registered mail to Revenue Canada on June 15. There is no policy in the office to inventory what goes into the envelopes to Revenue Canada. Even if I accepted that the office policy was sufficient to prove that there was a registered envelope sent to Revenue Canada on June 15, and that office policy proves that all cheques received between March 15 and June 15, would be in that envelope (which I do not), it is not sufficient to demonstrate that the six postdated cheques were in that envelope. The office policy is that postdated cheques would lay on Ms. Carr’s desk either in her diary, or in an envelope. A quick review of her diary shows that it still contains a cheque, almost four years later that was never taken out of the diary and deposited. I cannot think of a more sloppy way of handling clients’ cheques than how they were handled by this office and the failure to inventorize the enclosures to Revenue Canada is unimaginable when they are sending somewhere one and two inches of cheques quarterly to Revenue Canada.

Analysis

Pursuant to the Act, the assessment by the Minister is deemed valid and the onus is on the appellant to prove on a balance of probabilities that the six postdated cheques were in fact sent to Revenue Canada by registered post. I accept as fact that the appellant did prepare the required six postdated cheques for himself and his wife, in the proper amount, properly dated, and were left with their agent, Watford. The evidence of general office procedure is not sufficient to meet on a balance of probabilities that the cheques, in fact, ended up in a registered envelope to Revenue Canada and that the envelope was delivered to Revenue Canada. There is no documentary evidence such as an inventory of what went into the envelope or copies of what went into the envelopes to Revenue Canada, that demonstrates that these six cheques (which I find existed) were ever put in an envelope and sent by registered mail to Revenue Canada or received by Revenue Canada.

For these reasons, the appeal is dismissed with costs.

It was agreed at the end of the trial that the evidence before me in the John Dudley Cordingley appeal would also apply to the Margery Irene Cordingley appeal, No. 92-1017G, and her appeal is also therefore dismissed, without costs.

Appeal dismissed.