Date: 20010524
Docket: 98-2233-IT-G
BETWEEN:
RICHARD HARLICK,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
Beaubier, J.T.C.C.
[1]
This appeal pursuant to the General Procedure was heard at
Lethbridge, Alberta on May 18, 2001. The Appellant was the only
witness.
[2]
Paragraphs 9 to 11 inclusive of the Reply to the Notice of Appeal
read:
9.
By Notice of Assessment No. 03390 dated February 13, 1998, the
Minister of National Revenue (the "Minister") assessed
the Appellant for federal income tax deducted at source but not
remitted by Best West Forest Industries Ltd. in the amount of
$23,341.24 as follows and as detailed in Schedule 1 attached
herein:
|
ASSESSMENT DATE
|
TIME FRAME
|
FEDERAL TAX
|
|
May 26, 1995
|
Sept. - Dec. 1994
|
$10,260.08
|
|
May 26, 1995
|
Jan. - Mar. 1995
|
$9,271.05
|
|
June 13, 1995
|
April 1995
|
$1,704.35
|
|
August 30, 1996
|
T4 Difference/95
|
$2,105.76
|
|
Total Federal Tax
|
|
$23,341.24
|
10.
In so assessing the Appellant, the Minister made the following
assumptions of fact:
(a)
At all material times to the Appeal the Appellant was a director
of Best West and remained as a director of Best West until Best
West ceased operations.
(b)
Best West was originally incorporated as Western Forest
Industries Ltd. on September 8, 1994 and changed its name to Best
West on May 31, 1995.
(c)
Best West failed to remit to the Receiver General the amounts as
set out in Schedule 1 and failed to pay interest relating to the
unremitted source deductions.
(d)
Best West received assessments from the Minister from May 26,
1995 to August 30, 1996 for federal tax, federal penalty,
provincial tax, Canada Pension Plan, Canada Pension Plan penalty,
Unemployment Insurance premiums, Unemployment insurance premium
penalty and interest as set out in Schedule 1 attached
herein.
(e)
Best West paid its employees and withheld source deductions from
its employees' pay cheques pursuant to the Income Tax
Act.
(f)
At all material times to the Appeal the Appellant exercised the
powers and duties of a director of Best West.
(g)
The Appellant was actively involved in the day-to-day
operations of Best West.
(h)
The Appellant's responsibilities with Best West included, but
are not limited to, the following:
(i)
management
(ii)
paperwork
(iii)
taking care of office duties
(iv)
responsibility for accounts payable
(v)
signing bank cheques and other financial commitments
(vi)
obtaining logging and trucking contracts
(vii) dealing
with Revenue Canada for Best West
(i)
Best West failed to remit to the Receiver General federal income
tax, provincial income tax, Canada Pension Plan and Unemployment
Insurance withheld from the wages paid to its employees and the
interest thereon in an amount not less than $40,915.98 as
detailed in Schedule 1 attached herein of which the Federal Tax
portion is as follows:
|
Time Frame
|
UNREMITTED AMOUNT
OF FEDERAL TAX
|
|
Sept. - Dec. 1994
|
$10,260.08
|
|
Jan. - March 1995
|
$9,271.05
|
|
April 1995
|
$1,704.35
|
|
1995 T4 Differences
|
$2,105.76
|
|
Federal Tax
|
$23,341.24
|
(j)
The Appellant took no active steps to ensure that remittances of
payroll deductions were being made.
(k)
The amounts, as detailed in Schedule 1, that were not remitted as
and when required by the provisions of the Income Tax Act were
used by Best West to carry on its operations and to satisfy other
creditors.
(l)
Best West failed to have any system to ensure remittances were
made, no control mechanisms to monitor that remittances had been
made, and the Directors of Best West, including the Appellant,
failed to take any action to supervise the payment of such
remittances.
(m) All
payments made by Best West were properly allocated by the
Minister.
(n)
The Appellant signed Minutes of Meetings of Best West as late as
November 10, 1995 as a director of Best West.
(o)
The Appellant signed cheques for Best West which included but is
not limited to the period from March 1995 to October
1995.
(p)
On June 20, 1995 the Appellant resigned as President of Best West
but remained as Director.
(q)
The Appellant did not exercise the degree of care, diligence and
skill to prevent the failure to remit the said amount by the
Corporation that a reasonably prudent person would have exercised
in comparable circumstances.
B.
ISSUES TO BE DECIDED
11.
The issue to be decided is whether the Appellant is liable under
subsection 227.1(1) for the failure by Best West to remit to the
Receiver General an amount of federal income tax with penalties
and interest thereon, as required by section 153 of the Income
Tax Act (the "Act").
[3]
The Appellant failed to rebut any of the assumptions in paragraph
10 of the Reply.
[4]
In particular, the Appellant blamed a Mr. McDonald for the
problems of Best West. But in fact, the Appellant signed
contracts which he states he objected to, signed Best West
cheques, kept the Best West records on his personal computer
until after the period in question and received Best West mail in
his personal mail box until after the period. He was also Best
West's payments officer until November 20, 1995, long after
the periods in dispute.
[5]
The Appellant was always an inside director. He resigned as
president in June, 1995. But he continued as a director until
Best West terminated.
[6]
In fact, the record is that the Appellant hung on, hoping that
the company would succeed. But he did not take any steps to
prevent Best West's failure to remit the withholdings. There
is no evidence that the Appellant exercised any care, diligence
or skill for that purpose.
[7]
Pursuant to subsection 227.1(7) the Appellant is entitled to
receive contributions from other directors of Best West who are
liable for this claim.
[8]
The appeal is dismissed.
Signed at Ottawa, Canada this 24th day of May 2001.
"D.W. Beaubier"
J.T.C.C.
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