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Citation: 2004TCC182
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Date: 20040309
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Docket: 2002-2070(GST)G
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BETWEEN:
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GEORGE PEARSON,
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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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REASONS FOR JUDGMENT
Teskey, J.
[1] The Appellant appeals a third
party assessment, notice of which is dated May 1, 2001,
assessing George Pearson Sr.
("George Sr.") as a director of 358747 Alberta
Limited ("358"), which had failed to remit Goods and
Services Tax ("GST"), and consequently George Sr.
had been assessed for the failed remittances.
Issue
[2] The only issue before the Court is
whether George Sr. was a de jure or
de facto director of 358 on or after May 1,
1999.
[3] George Sr. alleges that he
was not a de jure or a de facto director
on May 1, 1999 or at any time thereafter, and thus the
assessment was statute-barred.
[4] George Sr. gave evidence on
his own behalf and his son, George Pearson Jr.
("George Jr."), also gave evidence, having been
called to the witness stand on behalf of George Sr.
[5] Mary Pearson
("Mary") gave evidence for the Respondent.
[6] The evidence of George Sr.,
George Jr. and Mary was most unsatisfactory. There are major
conflicts among their testimonies. George Sr. and Mary, for
a part of the relevant time, were husband and wife.
George Jr. was George Sr.'s son.
[7] Remembering that at all times, the
onus is on George Sr. to show that he was not a
de jure or a de facto director of 358, on
or after May 1, 1999, I propose to deal with the documents
that are not in dispute to arrive at the true facts herein.
[8] The assessment of GST against 358,
notice of which was issued June 17, 1997 and was for the
period of February 20, 1995 to December 31, 1996,
amounted to $57,354.59 and when interest and penalties were
added, the total assessment, as of June 17, 1997, was
$96,093.25.
[9] 358 objected to the assessment on
September 15, 1997. The objection was signed by Mary as a
director on the advice of her own independent legal counsel,
James R. Ryan ("Ryan").
[10] On October 7, 1998 the Minister of
National Revenue (the "Minister") sent a letter to
358 at 615 Willowburn Crescent SE, Calgary, Mary's
residence and the former matrimonial home, with a carbon copy
going to Mary's counsel Ryan, confirming the assessment
against 358.
[11] On March 5, 1999, a bailiff
attended at 615 Willowburn Crescent and interviewed Mary.
Mary stated, amongst other matters, that she did not know if 358
was still operating.
[12] Numerous bank statements from the Royal
Bank, for 358 were filed in the Exhibit Book, the last
statement being for the period of April 25, 1996 to
May 27, 1996.
[13] On April 6, 1995, George Sr.,
George Jr. and Mary attended at the Royal Bank.
George Sr. and Mary signed for the bank a list of officers
and directors for 358, the officers being:
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George Sr.
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President
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George Jr.
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Vice-President
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Mary
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Secretary
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and the directors being: George Sr., George Jr. and
Mary.
[14] All three signed a certificate
confirming that a resolution had been duly passed by the
directors of 358 giving all three independent banking authority.
All three signed the usual banking card.
[15] Mary acknowledged that it was her
signature on many of the documents, some she did not identify and
some she denied. I will deal with these two latter issues as the
documents are reviewed herein.
[16] On September 4, 1996, Mary signed
Revenue Canada's GST form to elect a year-end of
December 31. The form shows her as the contact person.
[17] On November 19, 1996, a Notice of
Change of Directors was filed for 358 with the Alberta Municipal
Affairs Registry pursuant to the Business Corporation Act.
Mary said she had a problem recognizing her signature on it. When
I review the documents that she acknowledged that contained her
signature, I am satisfied that she signed this document. It
stated that George Sr. is no longer a director as of
March 1, 1995 and that she is the sole director. This
document is signed on October 8, 1996.
[18] The annual return for 358 was filed on
December 2, 1996 and Mary denies that it is her signature.
It appears to be the same signature and I find as a fact that it
is her signature. This return, dated November 27, 1996,
shows that all the shares of George Sr. have been
transferred to Mary.
[19] On February 14, 1997, Mary signed
a GST tax return.
[20] An Alberta corporation search for 358,
done on April 19, 2001, shows that:
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(i)
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the charter was struck on June 1, 1999;
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(ii)
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the last annual return was filed on December 2,
1996; and
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(iii)
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outstanding annual returns for the 2000, 1999, 1998 and
one previous file year.
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[21] In February 1995, an unpleasant
separation between Mary and George Sr. took place. In
Mary's testimony, "the war was on".
[22] On March 1, 1995, a four page
Affidavit was sworn by Mary, which contained four exhibits. This
Affidavit was in legal proceedings brought by Mary against
George Sr. Mary, in the Affidavit, is asking for exclusive
possession of the matrimonial home at 615 Willowburn
Crescent. She claims she is fearful of George Sr. and that a
claim under the Matrimonial Property Act was commenced on
February 7, 1995. She claims the marriage has been on the
rocks for some time and alludes to problems from the summer
before. She alleges that George Sr. broke into the house at
the beginning of February and she alleges that she signed the
documents that are the attachments to the Affidavit under
threat.
[23] Besides asking in the Affidavit for
exclusive use of the matrimonial home, she was seeking a
lis pendens against the business properties.
[24] The attachments to the Affidavit
are:
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(i)
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an assignment of the trade name from 368088 Alberta Ltd.
("368"), dated February 20, 1995 of L.P.
Sales to 358, signed by Mary on behalf of 368;
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(ii)
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an assignment of lease, dated February 20, 1995,
from 368 to 358, which Mary signed on behalf of the
original lessor, namely 344780 Alberta Ltd.
("344");
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(iii)
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a bill of sale for equipment, dated February 20,
1995, for $80,000.00 from 368 to 358, signed by Mary on
behalf of 368;
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(iv)
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a promissory note by 344 in favour of George Sr.,
dated July 28, 1994 for $72,700.11, signed by both
Mary and George Sr., the interest to be computed from
January 19, 1989 at 12% per annum.
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[25] I find that Mary and George Sr.
separated in the first part of February 1995 and reconciled the
first week of April 1995, they separated again on August 8,
1997. Mary, again, went to Court to get orders. They never
cohabited since that date and were divorced in December of 2002.
There is still litigation between Mary and George Sr. over
asset division. Mary has remarried.
[26] George Sr. stated that he could
not recall when he resigned as president but that 358 ceased
operations in the spring of 1997 and that was when he ceased
doing anything for 358 in any capacity and that, to his
knowledge, 358 was inactive.
[27] Thus, with Mary stating to the bailiff
in March of 1999 that she did not know if 358 was still operating
and with George Sr.'s testimony that it ceased operating
in the spring of 1997, I am satisfied that 358 did, in fact,
cease all operations in the year 1997.
[28] George Jr. is a refrigeration
mechanic whose evidence confirmed some of Mary's and
George Sr.'s testimonies. He was just a labourer. All of
them would have coffee each morning at 8 o'clock, then
the day's jobs would be set up for what was to do be done
that day and by whom. He only was in the office for 20 to
40 minutes each day as he was out doing his manual jobs.
[29] He did not remember the meeting at the
Royal Bank, but recognized all of their signatures and that he,
Mary and George Sr. had independent signing authority.
[30] George Jr. did not recall having
seen the alleged annual general meeting minutes of April 6,
1996, but identified the three signatures.
[31] George Jr. states that Mary was
running 358, that she did all the typing, all the bookkeeping,
banking and directions to the staff and that her duties remained
the same throughout. He also said that George Sr. inspected
used commercial equipment, purchased some, oversaw the
refurbishing of this used equipment and helped with the sales
thereof.
[32] Although there are many other written
documents and conflicting testimonies, I believe the above are
the only germane facts necessary to decide this issue.
[33] I find that George Sr. did resign
as a director effective March 1, 1995, which was
acknowledged by Mary in the Notice of Change of directors for 358
filed November 19, 1996.
[34] I find that Mary became the sole owner
of 358, which she acknowledged in the annual return filed
December 2, 1996.
[35] The Respondent argues that the
purported Minutes of the Annual General Meeting, dated
April 6, 1995, has the three signatures on a separate page
and that I should not give any credence to this document as both
Mary and George Jr. claim they never saw the document, but
acknowledge that it is their signatures on the second page.
Counsel suggests that the second page could come from another
document. This document, being Tab 23 in
Exhibit R-1, is the Respondent's exhibit. I do not
believe a litigant can challenge the validity of the document
that that party tenders to the Court as an exhibit, and in any
event, I accept the document as stating what was agreed upon by
all three. Mary did not have to set aside the documents attached
to her Affidavit, as she became the sole owner of 358. The
documents at the Royal Bank were a course of action by all three
to facilitate banking for 358. It demonstrates that all three
were prepared to say and certify anything for banking. I do not
accept these documents as evidence of the truth.
[36] On the basis of all the above evidence,
I find that George Sr. ceased to be a de jure
director on April 6, 1995 when his resignation was accepted
and confirmed for general public information, when the Notice of
Change of directors was filed on November 19, 1996.
[37] From all the documents and evidence, I
find that, after April 6, 1995, he acted as a
de facto director and co-managed 358 with Mary
up to the final separation in 1997. George Sr. was not sure
when he resigned as President, but he knew 358 ceased all
operations in the spring of 1997.
[38] Mary being the sole owner and director
of 358, which was no longer operating by the time of their final
separation, George Sr. walked away from 358 and did nothing
for 358 in any fashion. Thus, his position of being a
de facto director from the time of his resignation as
a de jure director ceased when he stopped doing
anything for 358, which coincided with 358 becoming dormant.
[39] It must be remembered that Mary owned
all the shares and was the sole director of a non-operating,
worthless company when she instructed her solicitor to have the
charter struck. The charter was struck on June 1, 1999. In
October of 1998, Mary and her solicitor knew that 358's
objection was disallowed. I assume there would be some delay from
the time of instruction to Ryan to have 358 struck and the actual
paperwork to be compiled and filed.
[40] For all the above reasons, the appeal
is allowed, with costs, and the assessment is vacated.
Signed at Toronto, Ontario, this 9th day of March, 2004.
Teskey, J.
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