Date: 20010510
Docket: 2000-1269-GST-I
BETWEEN:
KENNETH GORDON ALBERTAN,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
Hamlyn, J.T.C.C.
FACTS
[1] This is an appeal under Part IX of the Excise Tax Act (the "Act") in respect of the goods and services tax third party Notice of Assessment numbered 24760, dated February 17, 1998, wherein the Minister of National Revenue (the "Minister") assessed the Appellant in the amount of $36,732.60, calculated as follows, in accordance with subsection 323(1) of the Act:
Period Net Period
Ending Tax Interest Penalty Balance
1992-03-31 $15,838.49 $9,876.96 $10,880.15 $36,595.60
Legal fees 137.00 0.00 0.00 137.00
$15,975.49 $9,876.96 $10,880.15 $36,732.60
[2] In response to this assessment the Appellant filed an appeal to this Court which stated in part:
1. Canada Customs and Revenue Agency (CCRA) has assessed GST under subsection 323(4) of the Excise Tax Act more than two years after I ceased to be a director of Albertan Homes Ltd., and
the assessment is therefore statute barred by the provisions of subsection 323(5) of the Excise Tax Act.
2. CCRA claims that I am still a director of Albertan Homes Ltd., and has used insufficient and inaccurate information in making the assessment, viz. an inaccurate computer print out, Corporation Profile Report, provided by the Ontario Ministry of Consumer and Commercial Relations.
. . .
B. Statement of Relevant Facts in Support of the Appeal
1. I sold [gave] all of my shares in Albertan Homes Ltd. on January 1, 1995 to one Joe Bastos, a local lawyer. I ceased to be a director of Albertan Homes Ltd. on January 1, 1995, at which time I submitted my resignation as a director of the corporation in full compliance with the relevant statutes. My resignation was dutifully recorded in the minutes of the corporation. I attach (see Exhibit A) a letter from Joe Bastos dated January 12, 2000, to which he attached a copy of my resignation that is in the Minute Book of the corporation. This resignation is clearly dated January 1, 1995. . . .
[3] In so assessing the Appellant, the Minister made the following assumptions of fact. The Appellant accepted (a), (b), (d), (h), (i), (j), (k), (l), (m) and denied (e), (f), (g), (n), (o), (p):
(a) Albertan Homes Ltd. (the Corporation) registered under Part IX of the Act effective January 1, 1991 and was assigned registration number 124049271;
(b) on May 25, 1995, the Companies Branch of the Ministry of Consumer and Commercial Relations of Ontario cancelled the Corporation's Charter;
(c) the Appellant did not cease to be a director of the Corporation upon cancellation of the Corporation's Charter referred to in subparagraph (b) above;
(d) the Corporation was revived on May 13, 1997;
(e) as of November 30, 1999, the Appellant was still listed as director of the Corporation;
(f) the Appellant never resigned as director of the Corporation;
(g) at all material times, the Appellant was a director of the Corporation;
(h) at all material times, the Corporation was required to file GST returns on a quarterly basis and had a business year end of December 31 for GST purposes;
(i) at all material times, the Corporation was required to collect and remit GST in accordance with subsection 225(1) of the Act;
(j) pursuant to subsection 222(1) of the Act, the amounts collected on account of the net GST are deemed to be amounts held in trust for Her Majesty until they are remitted to the Receiver General;
(k) the Corporation's net tax for the reporting periods starting April 1, 1991 to March 31, 1992, as defined in subsection 225(1) of the Act is $15,975.49;
(l) a certificate for the amount of the Corporation's liability has been registered in the Federal Court pursuant to section 316 of the Act and has been returned unsatisfied in whole or in part;
(m) the Corporation failed to remit the amount of $15,975.49 in paragraph (f) as required by the Act;
(n) as director of the Corporation, the Appellant did not take steps to ensure that GST remittances were being made as required;
(o) as director of the Corporation, the Appellant failed to prevent the Corporation from using this trust money for other purposes;
(p) the Appellant, in his capacity as director of the corporation, did not exercise the degree of care, diligence and skill to prevent the Corporation's failure to remit the said amount that a reasonably prudent person would have exercised in comparable circumstances.
ISSUE
[4] The issue to be decided is whether the Appellant is liable under subsection 323(1) of the Act for failure by the Corporation to remit to the Receiver General an amount of net tax as required by subsection 225(1) of the Act, and the penalty and interest relating thereto.
THE ASSESSMENTS
[5] The Corporation was assessed on July 6, 1995.
[6] The Corporation was reassessed on January 14, 1996. The appeal to the Tax Court of Canada against this assessment was dismissed on September 28, 1998. The Appellant was assessed as a director in relation to the corporate assessment on February 17, 1998.
SIGNIFICANT EVIDENCE
DUE DILIGENCE
[7] With respect to GST compliance, the evidence of the Appellant was brief and not detailed. The Appellant stated he was a carpenter and not a bookkeeper.
[8] The Appellant stated that on behalf of the Corporation he should have collected the GST but did not do so. He said he put in place procedures to ensure GST compliance including the hiring of additional staff. No other monitoring steps or compliance efforts were tendered in evidence.
THE RESIGNATION
[9] The Corporation was incorporated on October 24, 1990. The Appellant was an originating director.
[10] In relation to the purported resignation as a director, the evidence was cursory and contradictory. The Appellant stated he resigned as a director on January 1, 1995. This resignation letter was filed with the Court with the Notice of Appeal and also filed with Exhibit A-1. It reads:
Re: Albertan Homes Ltd.
I Kenneth Gordon Albertan hereby tender by resignation as an officer and director of the corporation.
Dated at Kingston, this 1st day of January, 1995.
"Kenneth Gordon Albertan"
Kenneth Gordon Albertan
At that time the Corporation was insolvent. He said he sent the resignation and his ten shares with the minute book to a Mr. Bastos' legal office. He stated he gave these documents to Mr. Bastos without any consideration. On cross-examination, the Appellant could not remember when he took the Corporation documents to Mr. Bastos other than sometime in early 1995. He could not remember if he put the resignation in the Corporation minute book. Although he said he severed his connection with the Corporation after the spring of 1995 he continued to act on behalf of Albertan Homes Ltd. in relation to the GST corporate assessment and indeed he appeared on behalf of the Corporation as an agent before the Tax Court of Canada on September 28, 1998. The judgment from the Tax Court of Canada states "The Agent for the Appellant" (the Appellant in this case) "informed the Court orally that the Appellant (the Corporation) was withdrawing its appeal herein."
[11] In a Notice of Objection (Exhibit R-3 to this proceeding) the Appellant stated: "I last ceased to be a director on the 20th May 1998[1]".
[12] Exhibit A-3, a letter from the Canada Customs and Revenue Agency (the "CCRA") dated February 9, 2000 to the Appellant, had enclosed a Report on Objection by CCRA that stated as follows: "Mr. Albertan's representative claims he ceased being a Director of the Corporation on May 20, 1995, ... Mr. Albertan's representative is stating that Mr. Albertan sold the business in May 1995."
[13] Also, on cross-examination, Mr. Albertan was presented with Exhibit R-1. This document was a letter dated December 3, 1999 from the Appellant to Norma Jean Wooley, GST Appeals, stating "Attached is a copy of the letter of resignation." The copy is on Albertan Homes letterhead, is dated January 1, 1995 and reads:
I hereby resign as director of Albertan Homes Ltd. effective January 1, 1995.
Signed
"Ken Albertan"
Ken Albertan
1 January 1995
Date
The Appellant stated this was prepared and signed by himself in 1999 to comply with the CCRA request for the resignation.
[15] The effective date of the purported resignation is also clouded by several Ontario Corporate Profile Reports. Exhibit A-2 indicates “Tina Marie Bastos” commenced to be a director “1995/01/01” (production date of the profile was “1999/11/30”). Exhibit R-2 indicates “Tina Marie Bastos” commenced to be a director “1995/05/20” (production date of the profile was “1999/11/30”). Exhibit R-2 also indicates “Kenneth Gordon Albertan” commenced to be a director “1990/10/24” (production date of the profile was “1999/11/30”).
[16] Further confusion arises with Exhibit A-4, an unsigned and undated Ontario Corporation Form 1 that indicates “Tina Marie Bastos” was elected a director 1995/05/20 and that “Albertan Kenneth Gordon” was no longer a director or officer. This Form and the Schedule attached to it was required to be certified by either an officer or director of the Corporation. The document was not so certified.
CONCLUSION
[17] The Appellant has the onus to show the purported resignation was given and effective and was of a precise date. He has not done so. The conflict between the dates (January 1, 1995 letter of resignation and the May 20, 1995 Notice of Objection) was not resolved. His issuance and production of a different form and content copy of the resignation on a letterhead of Albertan Homes signed (Exhibit R-1) and back-dated without any explanation on its face causes this Court concern. Further, the corporate profile report (Exhibit R-2) that indicates Kenneth Gordon Albertan as of 1999/11/30 was still a director of the Corporation has not been fully clarified or explained. Moreover the Appellant’s authoritative representations to government and this Court on behalf of the Corporation with respect to the corporate assessment well after his purported resignation and purported separation from the Corporation is confusing and not resolved. Indeed this activity by the Appellant leads to an inference the Appellant if not a director was acting as a deemed or defacto director.
[18] The Appellant could have subpoenaed as a witness the stated recipient of the Corporation, Mr. Bastos, who may have been able to shed some light on the purported resignation and the continuing representation on behalf of the Corporation by the Appellant to government and before this Court. The Appellant also could have subpoenaed Tina Marie Bastos who appears in the corporate profile reports as a director. Unfortunately neither of the Bastos gave evidence.
[19] The conclusion is that many key assumptions of the Minister have not been dislodged. I further conclude in particular, the assumption at all material times, the Appellant was a director of the Corporation is unassailed.
[20] As a director, the Appellant did not take steps to ensure that GST remittances were being made as required. The Appellant in his capacity as director of the Corporation did not exercise the degree of care, diligence and skill to prevent the Corporation's failure to remit the said amount that a reasonably prudent person would have exercised in comparable circumstances.
[21] The Appellant's alternative argument is that the condition precedent in paragraph 323(2)(b)[2] of the Act prevents the Minister from assessing him under subsection 323(1) as the Corporation had been dissolved under subsection 241(4) of the Ontario Business Corporations Act[3] (the "OBCA"). On May 13, 1997, the Corporation was revived under subsection 241(5) of the OBCA which provides that the Corporation regains all rights and liabilities "to the same extent as if it had not been dissolved". The Appellant was assessed personally as a director on February 17, 1998, subsequent to the said revival. Moreover, in Alton Renaissance I et al. v. Talamanca Management Ltd. et al.,[4] Sheard J. pointed out that a "dissolution" under subsection 241(4) of the OBCA does not "have the finality that the word suggests" and he rather described the Corporation as being 'suspended, rather than dissolved'."
[22] The Appellant can therefore not rely as a defence on paragraph 323(2)(b) of the Act which suggests that the Corporation has commenced liquidation or dissolution proceedings. Such proceedings have not been commenced in the present appeal, nor has a liquidator been appointed to which the Minister could have proven his claim.[5] Since the limitation period in paragraph 323(2)(b) does not apply to the facts of this case, the Appellant has clearly not acquired any post-dissolution rights as a result of the so-called "dissolution". The assessment against the Appellant was within the statutory limitation period.
DECISION
[23] The Appellant has not met the onus imposed upon him. The appeal is dismissed.
Signed at Ottawa, Canada, this 10th day of May 2001.
"D. Hamlyn"
J.T.C.C.
[1] The Respondent conceded "1998" was a misstatement and the year dated should have been 1995.
[2] A director of a corporation is not liable under subsection (1) unless
...
(b) the corporation has commenced liquidation or dissolution proceedings or has been dissolved and a claim for the amount of the corporation’s liability referred to in subsection (1) has been proved within six months after the earlier of the date of commencement of the proceedings and the date of dissolution;
[3] R.S.O. 1990, c. B. 16.
[4] (1993), 99 D.L.R. (4th) 707.
[5] Kennedy v. M.N.R., 91 DTC 1037 (T.C.C.).