Date: 20020326
Docket: 96-4827-IT-G,
96-4828-IT-G
BETWEEN:
EDDY ROMANIN,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
____________________________________________________________________
For the Appellant: The Appellant himself
Counsel for the Respondent: Sherry Darvish
____________________________________________________________________
Reasonsfor
Judgment
(Delivered orally from the Bench at
Toronto, Ontario, on March 4, 2002)
Bowie J.
[1]
The assessments under appeal here are raised under section 227.1
of the Income Tax Act. There are two assessments and there
is an appeal from each of those.
[2]
The appeal that is numbered 4827 is in respect of the liability
for withholdings of a company called Mezzanine Steel Limited. And
that which is numbered 4828 is in respect of the liability for
unremitted withholdings of a company called 952240 Ontario
Limited, which I shall call "the numbered company". The
period during which amounts were withheld from wages and salaries
paid to employees for income tax, unemployment insurance and
Canada Pension Plan by Mezzanine Steel is in the years 1991 to
1993; and in respect of the numbered company, the years in
question are 1993 and 1994. The companies were duly assessed and
no issue has apparently been taken with the assessments against
them.
[3]
The Notices of Appeal in the two appeals before me now were drawn
by solicitors who no longer act for the Appellant, and they
raised a number of issues. It was agreed between the Appellant
and counsel for the Respondent at the outset this morning that in
fact the assessments were made against the companies, that the
companies' debts were in fact the subject of certificates
under the Income Tax Act filed in the Federal Court, and
that writs of execution were returned nulla bona by the
sheriff, thereby disposing of all of those issues.
[4]
The only issue remaining for trial then, it was agreed, was the
issue whether Mr. Romanin, as a director, exercised due
diligence in respect of the debts to Revenue Canada for
unremitted withholdings. His capacity as a director was initially
raised in the Notices of Appeal but that too has been abandoned,
and it is quite clear, both from the agreement between the
Appellant and counsel at the outset and from
Mr. Romanin's evidence, that he was a director, and he
was president of Mezzanine Steel during the relevant period, and
that he was a director, and I think president as well, of the
numbered company during the relevant period of time.
[5]
Mr. Romanin said in his evidence in respect of both of those
companies that, during the period of time when the debts for
withholdings accumulated, weekly meetings of the directors were
held which, among other things, reviewed the financial situation
of the companies. Those financial situations, and in particular
the debts owing and the accounts payable, were reviewed with the
bookkeeper for Mezzanine Steel, a Mr. Tony Rocha. Mezzanine
Steel was engaged in the steel fabrication business until it
stopped operating in the middle of 1994. It seems to have been
the failure of Mezzanine Steel that caused Mr. Romanin and
his partners then to incorporate the numbered company, which also
operated as a steel fabrication business under the name of
Tri-Steel during the period 1993 until 1994. So far as I can
determine from the evidence, the personnel were essentially the
same. Certainly, Mr. Romanin said in his evidence that Tony
Rocha was the bookkeeper for Tri-Steel initially, and that he was
replaced later by a Ms. Giselle Kalnassy.
[6]
Both companies held the weekly board meetings to which I
referred, and clearly there were discussions with Mr. Rocha,
and later Ms. Kalnassy, as to the outstanding liabilities of
the company and more specifically as to which creditors should be
paid and which creditors should not be paid.
[7]
As is altogether too common in business, there seems to have
been, and I think it is indisputable on the basis of
Mr. Romanin's evidence, if not an overt then at least a
tacit decision made, to which Mr. Romanin was party, that
most, if not all, of the limited funds that these companies had
to operate with, would be used to pay suppliers rather than
Revenue Canada.
[8]
As Mr. Romanin put it, with an admirable if not remarkable
degree of candour in the course of his evidence, he took the view
that the main duty of a director is to keep the company afloat no
matter what institutions may suffer as a result of that. In
cross-examination he agreed that those institutions that
might suffer in order keep the company afloat would include
Revenue Canada.
[9]
This business philosophy of course ignores the fact that
withholdings for income tax, for unemployment insurance, and for
Canada Pension Plan contributions are trust funds which belong to
somebody else. They are not available to pay trade creditors;
they are not available to be used for the general purposes of the
business. They are in the hands of the company as a trustee for
one purpose only, and that is to remit them to the Receiver
General for Canada. Mr. Romanin's evidence, as I said,
was candid that this principle was simply ignored.
[10] I cannot
on the evidence before me find that there was even a slight
amount of diligence exercised by Mr. Romanin to see that his
duty as a director in respect of the trust funds was carried
out. I have no alternative, therefore, but to dismiss these
appeals. The two appeals are dismissed. Costs to the Respondent
in the amount of $2,000 in respect of the two appeals.
Signed at Ottawa, Canada, this 26th day of March, 2002.
"E.A. Bowie"
J.T.C.C.
COURT FILE
NO.:
96-4827(IT)G and 96-4828(IT)G
STYLE OF
CAUSE:
Eddy Romanin and Her Majesty the Queen
PLACE OF
HEARING:
Toronto, Ontario
DATE OF
HEARING:
March 4, 2002
REASONS FOR JUDGMENT BY: The
Honourable Judge E.A. Bowie
DATE OF
JUDGMENT:
March 11, 2002
APPEARANCES:
For the
Appellant:
The Appellant himself
Counsel for the
Respondent:
Sherry Darvish
COUNSEL OF RECORD:
For the
Appellant:
Name:
N/A
Firm:
N/A
For the
Respondent:
Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
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