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Citation: 2007TCC238
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Date: 20070504
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Docket: 2005-193(IT)G
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BETWEEN:
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ANTHONY COMPARELLI,
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Appellant,
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and
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HER MAJESTY THE QUEEN,
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Respondent.
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____________________________________________________________________
Counsel for the Appellant: Douglas D. Langley
Counsel for the Respondent: Jenny P. Mboutsiadis
____________________________________________________________________
REASONS FOR ORDER
(Delivered
orally from the Bench at
Toronto,
Ontario, on January 19, 2007)
McArthur J.
[1] This
is a motion for an Order that the Minister of National Revenue has Hillary Fox,
on behalf of the Respondent, re-attend to answer the refusals given during her
examination for discovery on October 20, 2006. The motion continues requesting
an Order extending time. I will deal with that at the end.
[2] Grounds for the motion includes that on
October 20, 2006, Hillary Fox attended an examination for discovery. During the
examination, she improperly refused to answer questions about the liability of
other directors of mindthestore.com, which I will refer to as the corporation.
[3] The appeal from which this motion flows is
from an assessment under subsection 227.1(1) of the Income Tax Act, and
related sections arising from unremitted payroll deductions of the corporation,
of which the Appellant was one of five directors. The Appellant seeks information
with regard to his four co‑shareholders, and that information includes:
Were they assessed for the corporation's liability, and if not, why not? If so,
did they appeal? The Appellant requests copies of all correspondence, reports
and other detailed information with respect to the other four shareholders.
[4] The Minister's position is that the Respondent
is prohibited under paragraph 244(1)(1) of the Income Tax Act
from responding, and further that the information is not relevant to any issue
in the appeal.
[5] The Appellant's position includes that the
other directors' information is relevant to his appeal, particularly in that
errors may have been made with respect to the four shareholders, which affect
his assessment. He asks that the information be disclosed by the Minister
pursuant to paragraph 241(4)(b). The resolution to this motion relies
primarily on the application of the following sections. Which read as follows:
241(1) Except as authorized
by this section, no official shall
(a) knowingly
provide, or knowingly allow to be provided, to any person any taxpayer
information
It goes further in that regard. The exception that the
Appellant relies on is contained in paragraph 241(4)(b) where taxpayer
information may be disclosed:
244(1) An official may
…
(b) provide
to any person taxpayer information that can reasonably be regarded as necessary
for the purposes of determining any tax, interest, penalty or other amount.
And it goes on further to expand.
[6] The question narrows down to whether
the information the Appellant seeks can reasonably be regarded as necessary for
the purposes of the issue in this appeal. Both parties agree that the issue is
whether the Appellant exercised the degree of care, diligence and skill to
prevent the failure of the corporation to make, and remit, deductions that any
reasonably prudent person would have exercised in comparable circumstances as
set out in subsection 227.1(3).
[7] The Appellant is in the unenviable position
of not knowing whether the information he requests is of assistance to him, or
necessary for his purposes. The four other shareholders may have or may not have
been assessed, we do not know.
[8] One thing that is
constant in subsection 227.1(3),
"due diligence cases", is that each appeal is to be considered on its
own particular merits. What may apply to one shareholder may not apply to a
fellow shareholder. The tests are both subjective and objective, and I refer to
the case of Soper v. The Queen.
The Appellant is concerned that the information relied on by the Minister for
his colleagues may have been incorrect. For instance, they may have submitted
that the Appellant was the only fully informed shareholder. I have been
provided with no information that assists me in this regard. There is
absolutely no evidence that assists in determining that other shareholder's
files can reasonably be regarded as necessary in determining whether the
Appellant met the due diligence requirements of the Income Tax Act.
[9] The Appellant did not testify. We do not
know if he asked his colleagues for their assessment history or not. The
Appellant's pleadings do not assist us in this regard. He does not challenge
anything but due diligence. The Minister's assumptions do not deal with the
other directors and pursuant to subsection 227.1(1), the Appellant is
jointly and severally liable for the corporation's failure to remit.
[10] Obviously the Minister cannot collect more
then what is owed by the corporation and he must provide an accounting to the
Appellant. However, from a reading of subsection 227.1(1), there is no
obligation on the Minister to assess the Appellant's co-shareholders. The
application of subsection 227.1(1) may be somewhat harsh with respect to the
Appellant in this instance. It is expected that the Minister will pursue
reasonable efforts to satisfy its claim through assessments of all directors,
to come within the meaning of subsections 227.1(1) or 227.1(3).
[11] Both parties referred to several cases. The
Appellant relied particularly on Page v. The Queen
in which three Appellants were directors together with two other Appellants of
a law firm management company, which failed to deduct or withhold and remit
certain amounts to the Receiver General. The Appellants were assessed in
respect to these amounts, but the remaining two directors were not. The
Appellants brought a motion pursuant to subsection 241(4) of the Act to
require the Minister to produce certain documentation concerning the other two
directors. In conclusion, Judge Bell wrote:
In each of the Appellant's
cases, the documents sought are not the income tax returns of any other person.
They, to the extent that any such documents exist, may contain inaccurate
information. In addition, such documents may have influenced the decision or
decisions of officers of Revenue respecting the liability of directors … .
[12] Also Bell J. referred to Page in General
Motors Acceptance Corp. of Canada Ltd. v.
R. where he stated, in part, that the five
directors were united in a common endeavour. It was the Court's opinion that
such documents were reasonably regarded as necessary for the purpose of
determining any tax, interest or penalty payable under the Act.
[13] In the present instance, we have no
evidence to assist in determining if there is, or may be, inaccurate
information and I am not prepared to guess, or draw an inference, that the
Minister's mind may have been influenced by information received from the
remaining shareholders. In Hockhold v. The Queen, a case which
specifically involved the motion to dismiss allegations, Rothstein, J. stated:
The plaintiff's concern seems
to be that other taxpayers were treated differently then he was by Revenue Canada. Whatever the reasons for Revenue Canada's action in respect of other taxpayers, they are not
relevant to the plaintiff's situation.
He also added at page 5344:
… While it is understandable that the
plaintiff considers it unfair that Revenue Canada appears to have treated
taxpayers in similar circumstances differently, that cannot be the basis for
the plaintiff's appeal.
These statements are relevant to the present
situation, although the Appellant is not asking to be treated the same, or not
to be treated differently from other taxpayers. He is requesting information
that may, or may not, assist him.
[14] The Minister has a serious obligation to
taxpayers to keep individual files in complete confidence. To break this trust
requires greater reasons than have been presented to me. I cannot conclude that
the information requested can be reasonably regarded as necessary for the issue
of whether or not the Appellant exercised due diligence. For these reasons, the
Appellant's motion is denied with costs to the Respondent.
[15] Further, the Appellant requested an extension of time
under Rule 125 of the Tax Court of Canada Rules (General
Procedure) for the purpose of answering undertakings, after an exchange with
counsel for the parties, I have extended that date to March 5, 2007.
Signed at Ottawa, Canada, this 4th day
of May, 2007.
McArthur
J.
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