Docket: 2011-1650(GST)I
BETWEEN:
RÉAL BOUDREAU,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
[OFFICIAL ENGLISH
TRANSLATION]
____________________________________________________________________
Appeal
heard on August 24, 2012, at Québec, Quebec.
Before: The Honourable Justice Paul Bédard
Appearances:
|
Counsel for the appellant:
|
Louis Sirois
|
|
Counsel for the respondent:
|
Éric Bernatchez
|
____________________________________________________________________
JUDGMENT
The appeal from an assessment made in respect
of the appellant under subsection 323(1) of the Excise Tax Act is
dismissed, in accordance with the attached Reasons for Judgment.
Signed at Ottawa, Canada, this 28th day of September 2012.
"Paul Bédard"
Translation certified true
on this 13th day of November 2012
Margarita Gorbounova, Translator
Citation: 2012 TCC 342
Date: 20120928
Docket: 2011-1650(GST)I
BETWEEN:
RÉAL BOUDREAU,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
[OFFICIAL ENGLISH
TRANSLATION]
REASONS FOR JUDGMENT
Bédard J.
[1]
This is an appeal from
an assessment (notice of which is dated July 18, 2006, and bears the number
PQ-2006-9010, for the period from May 1, 1998, to October 31, 2003) made
against the appellant under subsection 323(1) of the Excise Tax Act (the
ETA). At issue is whether, as a director of Couture universelle Inc. (the corporation),
the appellant is solidarily liable, together with the corporation, to pay
$182,182.19, the amount that the Corporation failed to pay, and interest and
penalties. It should be immediately pointed out that the evidence showed the
following:
(i)
On August 2, 2004, the
corporation made an assignment of its property;
(ii)
The claims in
bankruptcy were made within six months of the date of bankruptcy in accordance
with the conditions prescribed in paragraph 323(2)(b) of the ETA.
[2]
The only issue in this
case is whether the appellant exercised the degree of care, diligence and skill
to prevent the failure that a reasonably prudent person would have exercised in
comparable circumstances.
The appellant's argument
[3]
The appellant is of the
opinion that the care, diligence and skill defence set out at subsection 323(3)
of the ETA applies to him given that, as a director in good faith and a prudent
person, he could not have prevented the failure to pay the amount (in this
case, $182,182.19) related to the goods and services tax (GST) in that neither
he nor his corporation nor tax authorities could reasonably identify the amount
owing to the tax authorities before the corporation's bankruptcy. Indeed, the
appellant maintains that, had it not been for the theft of documents (invoices)
and the loss of documents by the department responsible for administering
welfare in Quebec (the Department) during a search on June 10, 1999, and by the
accountant mandated by the corporation to represent it during the audit, and
the accountant's negligence, the corporation would have been able to show to
the Minister that the assessment made in respect of the corporation was
unfounded.
[4]
The appellant testified.
His spouse, France Boudreau, also testified in support of the appellant's
position.
[5]
Ms. Boudreau's
testimony showed the following:
(i)
During the relevant
period, she produced all quarterly reports regarding GST and paid on time the
GST-related net tax. Ms. Boudreau specified that the corporation had given her
all the responsibilities related to its administration including that of
filling out GST reports.
(ii)
Her former son-in-law
had stolen documents (of unspecified nature) from the corporation in order to
be able to forge the appellant's signature. Ms. Boudreau explained that her
former son-in-law had extorted a sum of about $20,000 from the corporation in
2001 by forging the appellant's signature on cheques drawn on the corporation's
bank account. Finally, Ms. Boudreau added that her former son-in-law had been
convicted of theft in relation to that extortion. I note that Ms. Boudreau
has not filed in evidence any indictment, judgment regarding the theft or
complaint to the police. I note also that it would have been very interesting
to hear the testimony of the former son‑in‑law in this regard.
(iii)
On June 10, 1999,
police searched the corporation (as part of an investigation led by the
Department) and thus seized all of the corporation's documents. Ms. Boudreau
specified that, following that investigation, the corporation had been cleared
but that the investigators had lost a large part of the documents seized and
they had never been returned to the corporation. I note that the appellant
filed no documents regarding this search, such as an inventory of seized property
or his complaint with regard to the documents lost.
(iv)
As part of the audit, the
accounting firm, Voyer, Voyer et Associés (Voyer) was mandated to represent the
corporation. Ms. Boudreau added that Voyer had acted negligently in carrying
out its mandate in that it had refused to send to tax authorities the
corporation's reports, records and invoices, which would have negated the
assessment made in respect of the corporation. In sum, Ms. Boudreau claimed
that, if not for Voyer's negligence, the corporation's assessment would have
been negated and the corporation would not have declared bankruptcy. The
appellant filed in evidence a notice (Exhibit A-7) advising Voyer that, if it
failed to send the documents to the corporation within five days of the receipt
of the notice, proceedings for damages of $405,093.58 would be instituted
against it. I note that it would have been very interesting to hear a Voyer
representative give his or her version of the facts in this regard. I also note
that, in a letter dated March 28, 2007, Voyer, through its counsel, denied all
the allegations made against it by the appellant. Finally, I note that, in the
audit report filed in evidence as Exhibit A-1, the auditor reported that the
appellant was not very cooperative and that the accountant had told her that
the appellant had brought him certain documents only [Translation] "one by one".
[6]
In his testimony, the
appellant was content to essentially corroborate his spouse's testimony. The
appellant added that he had had nothing to do with the corporation's
management, given that he had no knowledge in that area, which explains why he
had given the corporation's management over to his spouse whom he trusted
completely.
Analysis and conclusion
[7]
At paragraph 23 of Buckingham
v. The Queen, 2011 FCA 142, the Federal Court of Appeal recently briefly
explained as follows the legal framework applicable to the care, diligence and
skill defence under subsection 323(3) of the ETA:
23. These
consolidated appeals raise three principal issues:
a. Is
the applicable standard of care, diligence and skill under subsection 227.1(3)
of the Income Tax Act and subsection 323(3) of the Excise Tax Act an
objective standard?
b.
Does the standard under subsection 227.1(3) of the Income Tax Act apply
differently than under subsection 323(3) of the Excise Tax Act?
c. Can
a successful defence under subsection 227.1(3) of the Income Tax Act or
subsection 323(3) of the Excise Tax Act be sustained where the efforts
of the directors are focussed on curing failures to remit rather than towards
preventing such failures?
[8]
I reiterate that the
appellant argued that, as a director in good faith and a prudent person, he
could not prevent the failure to pay the GST amount, which neither he, nor his
corporation, nor the tax authorities could reasonably identify before the
corporation's bankruptcy as owing to the tax authorities in that, had it not
been for the theft and loss of documents and negligence of the accountant, the
corporation would have been able to show the Minister that the assessment made
in its respect was unfounded. Therefore, first, the appellant had to satisfy me
of the facts alleged at paragraph 5. The appellant's evidence in this regard
was based essentially on his testimony and that of his spouse. It is certainly
not with vague, imprecise testimony contradicted by documents that he himself
filed in evidence (see my comments at paragraph 5) that the appellant could
hope to satisfy me. I would add that the appellant was able to produce relevant
evidence and to call certain witnesses (see my comments at paragraph 5), which
might have made it possible to elucidate the facts. He did not do so. I infer
from this that the evidence in question would have been unfavourable to him.
[9]
For these reasons, the
appeal is dismissed.
Signed at Ottawa, Canada, this 28th day of September
2012.
"Paul Bédard"
Translation certified true
on this 13th day of November 2012
Margarita Gorbounova, Translator
Email this Content