Date: 20011227
Docket: 2001-927-GST-I
BETWEEN:
JUDY REID,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasonsfor
Judgment
Beaubier, J.T.C.C.
[1]
This appeal pursuant to the Informal Procedure was heard at
Vancouver, British Columbia on December 6, 2001. The Appellant
testified. The Respondent called the auditor on the file,
Surrendar Purmar.
[2]
Paragraph 13 of the Reply to the Notice of Appeal reads:
In so assessing the Appellant, the Minister relied on the
following assumptions of fact:
a)
the facts stated and admitted above;
b)
the Company was incorporated in the province of British Columbia
on February 19, 1980;
c)
the Company registered under Part IX of the Act effective
January 1, 1991, and was assigned GST registration number
102173846;
d)
the Company was required to file its GST returns quarterly;
e)
the Company operated a food catering business, and, at all
material times, collected or was required to collect GST on its
taxable supplies;
f)
all of the Company's supplies for the relevant period were
taxable at the rate of 7 percent;
g)
at all material times, the Appellant was the sole director of the
Company, and has not resigned at any time;
h)
the Company failed to file GST returns for the reporting periods
from November 1, 1992 to April 30, 1993, and August 1, 1993 to
January 31, 1994;
i)
the Company agreed to its net tax liability as indicated in the
Tax Court of Canada Judgment issued on April 23, 1996;
j)
on May 8, 1998, a certificate for the Company's liability for
GST, penalty and interest was registered at the Federal Court of
Canada;
k)
on May 8, 1998, a Writ of Fieri Facias was filed in the amount of
$47,005.36 in respect of the Company's liability and was
returned nulla bonna on October 30, 1998;
l)
at all material times, the Appellant was an informed business
person with considerable experience; was knowledgeable as to the
responsibility of a director, was aware of the obligation to
collect and remit GST, and knew of her statutory liability as a
director for the Company's failure to remit GST; and
m)
the Appellant did not exercise the degree of care, diligence and
skill to prevent the failure to remit that a reasonably prudent
person would have exercised in comparable circumstances.
[3]
Assumptions 13(a) to (k) inclusive were not refuted. Those
remaining are in dispute.
[4]
Judy Reid ("Judy") is a mature woman who received her
high school and post high school training in Denmark. She moved
to Canada in 1964 and after three years began working in the
restaurant business. In the early 1970's she opened a bakery
in Delta, B.C., a suburb of Vancouver. In about 1980 she opened a
restaurant in the company name "Granny Brown's Family
Restaurant Ltd." (the "Company"). She was its
owner-operator.
[5] A
few years before the period in dispute the Company confined its
business to catering for schools, the tourist trade and for
government contracts. It had eight full-time employees and a
number of temporary or part-time employees, depending on the
season. One of the full-time employees was Miss Lock, the
bookkeeper and another was Mrs. Errett, the manager. There was
also a kitchen manager. Judy Reid was the owner-operator and
managed the whole enterprise. Judy signed all of the GST returns
and she prepared a set of work sheets contained in Exhibit R-2
which demonstrate a clear knowledge of accounting and the
operation of the GST.
[6]
In 1991 Judy got the flu and suffered a permanent loss of hearing
in one ear and, for a period of time, the loss of her balance.
She was bedridden at times in its beginning, but she continued to
go into the Company when she could. There is no evidence that she
was not there during the periods in question and she never denied
that she was there then.
[7]
In the Spring of 1993 Judy discovered that Miss Lock, the
accountant, had an alcohol problem and dismissed her. She then
had Mrs. Errett do the accounting. (Testimony and Exhibit R-1) At
this time, Judy did nothing to check on the GST or its returns,
despite the fact that she was the one who signed them. As
assumed, the Company failed to pay GST and to file GST returns
from November 1, 1992 until April 30, 1993 and August 1, 1993 to
January 31, 1994. Judy testified that she only realized this when
the audit occurred in 1994.
[8]
Judy described these times in her letter of May 9, 1995 (Exhibit
R-1) in the following words:
We were extremely busy during the summers of 1990/91/92/93 and
we were offered help with bookkeeping from an individual whom had
taken early retirement from Canfor Forest Products when they had
cutbacks, this individual had worked there for many years doing
accounting and bookkeeping. Subsequently this lady incurred some
personal tragedies, her sister became ill with cancer her mother
had a stroke, and both were diagnosed as terminally ill. As a
result of these personal problems, our bookkeeper developed a
problem with alcohol, this problem was not known to us, until the
Spring of 1993 and the individual ceased to work with us.
As explained earlier, we are a small business and were
extremely busy, I the writer was actively working in many areas
of the operation in order to successfully perform the duties
required to service the Train Contract we had at the time. I
relied on the paperwork compiled in a file folder monthly, and
presented to me for payment to be correct.
We tried to expand the business and moved the operation to larger
premises in late 1993, to start additionally providing School
Lunches.
The GST discrepancy were not known to us until the audit in
spring 1994. The Audit is already high, due to the fact that it
was taken from Deposit Books and in the deposit books once every
month there is a cheque issued from the Bank of Montreal and then
Deposited to the Royal Bank in order to cover a loan payment, and
these deposits were also counted as revenue.
...
[9]
Judy was ill and away from work in 1991 and, the Court believes,
for early 1992. But the defalcations in question began in
November, 1992. Judy's testimony in Court was to the effect
that her balance problems continued long after 1991. However, the
Court believes the statements quoted in Exhibit R-1; they were
made at a time much closer to the events described and they
correspond to much of Judy's testimony. Judy was the only
shareholder and director and was the hands-on operator of this
small business who was there on a day-to-day basis managing,
operating and supervising the staff and the operation.
[11] Moreover,
Judy was an inside director as that term is used by the Federal
Court of Appeal in Soper v. The Queen, 97 DTC 5407. And
she was the only director. Thus when she became ill, and later,
when she discovered Miss Lock's problems and fired her, Judy
had a duty to see that the Company was properly managed and that
it reported and paid its GST.
[12] Since
Judy signed the Company's GST returns, she had to know that
reports weren't being filed. As this Company's only
director, she had to know that it was not paying its GST. Not
only did she have a duty respecting these matters as the
Company's only director, the operation was sufficiently small
in terms of staff and management that, as a matter of course,
such knowledge was a part of her day-to-day duties as a chief
operating officer.
[13] As a
result, the Court finds that assumptions 13(l) and (m), as quoted
herein, are correct.
[14] The
appeal is dismissed.
Signed at Saskatoon, Canada this 27th day of December,
2001.
"D.W. Beaubier"
J.T.C.C.
COURT FILE
NO.:
2000-927(GST)I
STYLE OF
CAUSE:
Judy Reid v. Her Majesty the Queen
PLACE OF
HEARING:
Vancouver, British Columbia
DATE OF
HEARING:
December 6, 2001
REASONS FOR JUDGMENT
BY:
The Honourable Judge D.W. Beaubier
DATE OF
JUDGMENT:
December 27, 2001
APPEARANCES:
Counsel for the
Appellant:
K. Paul Lail
Counsel for the
Respondent:
Victor Caux
COUNSEL OF RECORD:
For the
Appellant:
Name:
K. Paul Lail
Firm:
Fritz, Lail, Sherriff & Vickers
Surrey, British Columbia
For the
Respondent:
Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
2000-927(GST)I
BETWEEN:
JUDY REID,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeal heard on December 6, 2001 at Vancouver,
British Columbia, by
the Honourable Judge D.W. Beaubier
Appearances
Counsel for the
Appellant:
K. Paul Lail
Counsel for the
Respondent:
Victor Caux
JUDGMENT
The
appeal from the assessment made under the Excise Tax Act,
notice of which is dated July 25, 1994 and bears number
11GU0309706, is dismissed in accordance with the attached Reasons
for Judgment.
Signed at Saskatoon, Canada this 27th day of December,
2001.
J.T.C.C.
Email this Content