Barker v. R., [1998] 3 CTC 2701, 98 DTC 1645

Bell T.C.J.:

Issue

The issue is whether the Appellant is liable, under subsection 227.1(1) of the Income Tax Act (“Act’) for the failure by Castleton Homes Ltd. (“Corporation”) to remit to the Receiver General for Canada certain amounts required to be remitted under section 153 of the Act.

Facts

The Appellant was, at all material times, the principal shareholder, a director and president of the Corporation. He had signing authority with respect to the Corporation and was involved in its day to day construction business operations. The Corporation was a person paying salary or wages or other remuneration pursuant to subsection 153(1) of the Act. During the 1990 taxation year, the difference between the total amount remitted by the Corporation and the amount shown on T-4 slips issued by the Corporation to employees and filed with the Department of National Revenue (“Department”) was $24,672.19. Penalties and interest were added by reassessment to the amounts not so remitted.

On December 4, 1991 a certificate for the amount of the Corporation’s liability for income tax, penalty and interest was registered in the Federal Court of Canada pursuant to subsection 223(2) of the Act. Execution for such amount was returned wholly unsatisfied on February 6, 1992.

The Appellant, who was obviously the driving force behind the Corporation, developed severe sinus problems combined with a wisdom tooth problem in April or May, 1990. He gave evidence of a number of operations and the almost constant consumption of antibiotics. It involved the removal of a wisdom tooth with a residual hole between his sinus and his mouth. He gave evidence of medical problems borne, evidently, of incompetence or carelessness on the part of doctors. He testified that he was not in a fit state from early 1990 to the end of 1991 to operate his company and that there was no one else so to do. He testified that he had made substantial efforts after that to discharge the company obligation and also that he had been assessed under section 227.1, personally, for liability. He continued as a director throughout the period from 1990 to 1994. The Corporation continued in existence until its dissolution under the British Columbia Company Act on July II, 1997. He said that his wife had signing authority during the period that he was ill. He further stated that he was in charge of payroll and remittances for the years subsequent to 1986 and that he was aware of the Corporation’s obligation to make appropriate remittances.

Jobina McLeod (“McLeod”), an officer of the Department, testified that she caused the issue of a Notice of Assessment dated November 3, 1994 and the forwarding of same by double registered mail to the Appellant at an address which was never disputed as being his correct address. That original Notice of Assessment was returned unclaimed. McLeod sent a copy of that Notice of Assessment to the Appellant by ordinary mail on December 20, 1994. It was not returned. She also sent several collection letters to that address and they were not returned.

The Appellant, according to McLeod, said that he received a lot of mail from the Department and that he put it in the garbage without looking at it.

The Appellant was unrepresented, an exercise not recommended in situations such as this where making a case and presenting legal arguments can be complex.

Subsection 227.1(1) reads as follows:

Where a corporation has failed to deduct or withhold an amount as required by subsection 135(3) or section 153 or 215, has failed to remit such an amount or has failed to pay an amount of tax for a taxation year as required under Part VII or VIII, the directors of the corporation at the time the corporation was required to deduct, withhold, remit or pay the amount are jointly and severally liable, together with the corporation, to pay that amount and any interest or penalties relating thereto.

(italics added)

The Corporation failed to remit amounts required by section 153 to be remitted. The Appellant was a director at the time the Corporation was required to deduct. His evidence with respect to his abilities during the portion of 1990 when he was ill was confusing. He testified that certain corporate matters were taken care of but that there was no provision made for the remission of taxes. He said that the company continued with some construction endeavours that were under way and so there was activity in the company requiring direction.

It is clear that the Appellant cannot escape liability under paragraph 227.1(2)(a) which provides that a director is not liable unless a certificate for the amount of the Corporation’s liability has been registered in the Federal Court and execution therefor has been returned unsatisfied in whole or in part. That was done.

The remaining question is whether the Appellant exercised the

degree of care, diligence and skill to prevent the failure that a reasonably prudent person would have exercised in comparable circumstances.

as set out in subsection 227.1(3). The Appellant was connected with other companies, being a director of companies in which he was involved and indeed of others. No evidence was adduced as to his activities with respect to those companies for the period under review. There is no doubt, having regard to the medical evidence given by him and the medical records filed by him with the Court that he was ill for the period in question. However, his evidence was not persuasive so far as him having exercised due diligence to prevent the failure of remitting is concerned. It appears that, while other matters may have been attended to, this matter simply did not receive his attention. It may well be that because of his inability to perform normally, the company’s fortunes waned. However, the statutory liability to remit tax is strict. His failure to pay attention to and cause the company to meet its obligations in that regard does not excuse him from liability under subsection 227.1(3).

I pointed out to him that an application could be made under the “fairness package” of the Act, being section 220. I explained to him that by virtue of that provision the Minister of National Revenue could “at any time waive or cancel all or any portion of any penalty or interest otherwise payable under” the Act.

For the above reasons, the appeal is dismissed.

Appeal dismissed.