Date: 19971010
Docket: 95-985-IT-G
BETWEEN:
MAJOCA INC.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
P.R. Dussault, J.T.C.C.
[1] The appellant is challenging five assessments for failure to comply with requirements to pay made under section 224 of the Income Tax Act ("the Act") in respect of Gérald Doyon, the tax debtor. The notices of assessment are numbered 29832, 29833 and 29834, all of which are dated May 30, 1994, and 29838 and 29839, dated July 21, 1994. The requirements to pay were sent to the appellant on October 29, 1993, and January 6, 1994.
[2] In making the assessments under subsection 224(4) of the Act, the Minister of National Revenue ("the Minister") relied, inter alia, on the facts set out in subparagraphs (a) to (i) of paragraph 8 of the Amended Reply to the Notice of Appeal. Those subparagraphs read as follows:
[TRANSLATION]
(a) Assessment no. 29832, dated May 30, 1994, for $1,991.03:
(i) A requirement to pay relating to an amount owed by Gérald Doyon to the Receiver General of Canada was sent to Majoca Inc. by registered mail on January 16, 1994 [sic], and was received by the said corporation on January 17, 1994, but the corporation never responded to it;
(ii) Majoca Inc. wrote a cheque to CIBC Visa on March 25, 1994, to pay Gérald Doyon's personal account;
(iii) Gérald Doyon signed cheque no. 0538 from Majoca Inc.'s bank account no. 401-256839-001 at the Hongkong Bank of Canada;
(b) Assessment no. 29833, dated May 30, 1994, for $3,200.00:
(i) After no response was received to a requirement to pay, the respondent made an assessment;
(ii) Majoca Inc. had issued a cheque for $3,200 payable to Gérald Doyon, who had signed cheque no. 0545, dated April 1, 1994, from Majoca Inc.'s bank account no. 410-256839-001;
(c) Assessment no. 29834, dated May 30, 1994, for $1,757.16:
(i) After no response was received to a requirement to pay, the respondent made an assessment;
(ii) The Hongkong Bank of Canada debited Majoca Inc.'s account no. 401-256839-001 on April 11, 1994, to pay legal fees for legal opinions given after the respondent had sent requirements to pay and seized accounts;
(iii) The said debiting of Majoca Inc.'s account was authorized by Gérald Doyon on March 7, 1994;
(d) Assessment no. 29838, dated July 21, 1994, for $14,600.00:
(i) After no response was received to a requirement to pay dated October 29, 1993, relating to an amount owed by Gérald Doyon to the Receiver General of Canada, the respondent made an assessment;
(ii) Majoca Inc. had issued cheques payable to Gérald Doyon, who had signed the said cheques, which were drawn from Majoca Inc.'s bank account no. 401-256839-001 at the Hongkong Bank of Canada;
Date Cheque number Amount
December 1, 1993 0515 $1,500
December 10, 1993 0514 $800
November 22, 1993 0510 $7,000
November 22, 1993 0509 $5,300
Total $14,600
(e) Assessment no. 29839, dated July 21, 1994, for $31,000.00:
(i) Further to a requirement to pay for failure to pay, the respondent made an assessment;
(ii) Majoca Inc. had issued a cheque for $31,000 to Gérald Doyon, who had signed the said cheque no. 0451, dated December 6, 1993, from the corporation's bank account no. 401-256839-001 at the Hongkong Bank of Canada;
(f) The requirement to pay dated October 29, 1993, sent to Majoca Inc. in connection with Gérald Doyon, the tax debtor, was returned marked [TRANSLATION] "we are not liable for any payments or advances", while no response was received to the requirement to pay dated January 6, 1994, sent to the same corporation;
(g) The amounts claimed in the two requirements to pay are $529,866.99 and $539,447.39;
(h) When the requirement was issued and then received on January 17, 1994, Gérald Doyon was a tax debtor for $529,866.99 within the meaning of the Income Tax Act;
(i) When the requirement was issued and then received on January 17, 1994, the appellant was or was about to be a debtor of Gérald Doyon, the tax debtor.
[3] Marc Weldon, a collection officer for Revenue Canada, testified that he had discovered that Mr. Doyon owned all of the appellant's shares when he examined the income tax returns of the appellant and Mr. Doyon for previous years. Further, since he had noted that the appellant had already paid Mr. Doyon salaries and dividends and had advanced money to him, and given that no progress was being made in the negotiations for the payment of Mr. Doyon's tax liability, he decided to take the necessary steps to intercept any amounts that might be paid to him in that regard. The first requirement to pay was therefore sent to the appellant on October 29, 1993,[1] on the basis of that information.
[4] Daniel Phaneuf, also a collection officer for Revenue Canada, testified that he used the same information to send the appellant another requirement to pay on January 6, 1994.
[5] The requirements of October 29, 1993, and January 6, 1994, which were prepared using form T1118A or B, duly completed with a reference to the tax debtor, Mr. Doyon, contain four paragraphs encompassing all the amounts that might be paid and that were covered by subsections 224(1), (1.1) and (3) of the Act at the relevant time.
[6] Counsel for the appellant is not challenging the requirements to pay as such, although, as I understand it, his argument that the assessments are invalid seems to be based on the fact that the requirements related only to amounts the appellant might lend or advance to the tax debtor, that is, amounts covered by subsection 224(1.1) of the Act. It is clear simply from reading the documents in question that this is not the case.
[7] At the start of the hearing, counsel for the appellant admitted that Mr. Doyon owed taxes and that the appellant had paid the assessed amounts.
[8] Before considering the validity of each assessment, I will note that Mr. Phaneuf of Revenue Canada testified that although the appellant made a number of payments by cheque following each requirement to pay, assessments were issued only in respect of payments he was sure were made to Mr. Doyon or for his benefit.
[9] I will deal with each assessment separately. However, I believe it should be pointed out first that each notice basically states the same thing (except for the amounts and dates written[2] in the blank spaces) under the heading NOTICE OF ASSESSMENT CONCERNING:
[TRANSLATION]
The liability under subsection 224(4) of the Income Tax Act in the amount of $________ for failure to comply with a requirement to pay dated __________, concerning Gérald Doyon, S.I.N.: [the number is written in], and for paying $_________ to him, for him or on his behalf on _________.
I. Assessment for $1,991.03 - Notice #29832, May 30, 1994
[10] The notice of assessment refers to the requirement to pay of January 6, 1994, and to a payment made to Mr. Doyon, for him or on his behalf, the amount of which was equal to the amount assessed. The payment in question was made in fact by the appellant to CIBC Visa through a cheque signed by Mr. Doyon. The amount was credited to Mr. Doyon, the cardholder.
[11] In his testimony, Mr. Doyon stated that the CIBC Visa card was used to pay the appellant's expenses and not his personal expenses. However, he did not provide any explanation of what type of expenses had been put on the account and paid through the cheque for $1,991.03. Mr. Doyon also said that he paid his personal expenses with cash or a personal credit card, if he had one at the time, which he could not remember.
[12] I consider this evidence insufficient to vacate this assessment.
[13] While the Reply to the Notice of Appeal and the Amended Reply to the Notice of Appeal indicate that the assessment was made under subsection 224(4), they make no reference to subsection 224(4.1). Although this point was not raised by counsel for the appellant in relation to this assessment, I believe that it should be discussed now, if only to clarify the situation immediately. Since the payment in question was not made directly to the tax debtor but rather was made by the appellant on his behalf, it is covered by subsection 224(1.1) of the Act,[3] and the appellant's failure to comply with the requirement means that it is liable to pay the amount in question itself under subsection 224(4.1) of the Act, not subsection 224(4).
[14] The notice of assessment also refers only to subsection 224(4) of the Act, and not to subsection 224(4.1). However, the liability to pay $1,991.03 is clearly indicated:
[TRANSLATION]
[F]or failure to comply with a requirement to pay dated January 6, 1994, concerning Gérald Doyon ... and for paying $1,991.03 to him, for him or on his behalf.
(emphasis added)
[15] I do not think that the mere failure to mention a provision of the Act in a notice of assessment makes an otherwise valid assessment invalid, especially where the notice clearly states the nature of the tax liability and there is no possibility of confusion. The purpose of subsections 224(4) and (4.1) is to penalize a failure to comply with a requirement. Although the amounts in question are different in nature, the requirement mentions each and every one of them, whether they are covered by subsection 224(1), (1.1) or (3).
[16] On this point, reference can also be made to subsections 152(3) and (8) and section 166 of the Act. In Belle-Isle v. M.N.R., 63 DTC 347 (T.A.B.), Mr. Boisvert, Q.C., of the Tax Appeal Board commented on previous equivalent provisions as follows at page 349:
Where the above texts are concerned, it matters little under what section of the Act an assessment is made. What does matter is whether tax is due.
[17] This comment has been repeated, inter alia, by the Federal Court of Appeal in Riendeau v. The Queen, 91 DTC 5416, at page 5417.[4]
[18] Accordingly, this assessment is confirmed and the appeal is dismissed.
II. Assessment for $3,200.00 - Notice #29833, May 30, 1994
[19] This assessment under subsection 224(4) of the Act, which relates to a $3,200.00 payment made to Mr. Doyon by cheque on April 1, 1994, is for failure to comply with the requirement of January 6, 1994.
[20] Since no evidence was adduced by the appellant about this assessment, the assessment is confirmed and the appeal is dismissed.
III. Assessment for $1,757.16 - Notice #29834, May 30, 1994
[21] This assessment relates to a payment made by debiting the appellant's bank account at the Hongkong Bank of Canada to pay legal fees for legal opinions requested by the bank in connection with requirements to pay issued and account seizures carried out by the Minister. The payment authorized by Mr. Doyon is dated April 11, 1994, and the assessment is for failure to comply with the requirement of January 6, 1994.
[22] Mr. Doyon testified that the payment related to the garnishment of a bank account under the name of Immeuble Lacombe, 20 percent of the shares of which were owned by the appellant and not him.
[23] Counsel for the appellant argued that the appellant made this payment to cover legal fees for which it, and not Mr. Doyon, was responsible, and he referred to the invoice adduced in evidence by counsel for the respondent.[5] According to that invoice, $355.76 was owed for an opinion concerning Immeuble Lacombe's new account and there was a previous balance owing of $1,401.40. Moreover, the bank debit memo[6] is marked [TRANSLATION] "Legal Fees (Legal Opinions Re: Requirements to Pay and Account Garnishment)".
[24] The assessment was made for failure to comply with the requirement to pay and for having paid $1,757.16 to Mr. Doyon, for him or on his behalf.
[25] Failing any additional explanation by Mr. Doyon or any documents from the appellant concerning the other opinions requested in connection with the previous balance of $1,401.40, I consider the evidence insufficient to reduce the assessment by more than $355.76. This assessment is therefore reduced from $1,757.16 to $1,401.40.
[26] The comments made above about the sufficiency of the notice of assessment are also applicable here.
IV. Assessment for $14,600.00 - Notice #29838, July 21, 1994
[27] This assessment relates to the following four payments made to Mr. Doyon by the appellant by cheque:
$800.00 - December 1, 1993
$1,500.00 - December 1, 1993
$5,300.00 - November 22, 1993
$7,000.00 - November 22, 1993
[28] The assessment is for failure to comply with the requirement to pay of October 29, 1993.
[29] Mr. Doyon testified that the appellant had paid him all of these amounts as salary and not as an advance or loan, which meant that he did not have anything to repay in this regard. Counsel for the appellant, referring to this Court's decision in Meredith v. The Queen, 94 DTC 1271, and to the Exchequer Court's decision in Associated Investors of Canada Ltd. v. M.N.R., 67 DTC 5096, argued that a payment of salary must be distinguished from an advance or loan, since it is not covered by the requirement to pay provided for in subsection 224(1.1) and therefore cannot be the subject of an assessment under subsection 224(4.1).
[30] I admit that I have some difficulty understanding this argument, since the notice of assessment states on its face that the assessment was made under subsection 224(4) of the Act, not subsection 224(4.1). To start with, the payment of a salary is clearly covered by subsection 224(1) of the Act. Subsection 224(3) also applies to any amount paid periodically and subsequently as remuneration. The penalty for failure to comply with these two provisions is an assessment under subsection 224(4) of the Act. The assessment under this subsection is therefore valid.
[31] Counsel for the appellant argued that if the assessment is otherwise found valid, it should be reduced to take account of the rules in the Quebec Code of Civil Procedure on the portion of salary that is normally exempt from garnishment.[7]
[32] While subsection 225(5) provides that provincial rules on exemptions from seizure may apply where goods and chattels are seized under section 225, such a rule does not exist and has not been recognized in the case of a requirement to pay under section 224 of the Act.[8]
[33] The assessment is therefore confirmed and the appeal is dismissed.
V. Assessment for $31,000.00 - Notice #29839, July 21, 1994
[34] This assessment relates to a $31,000.00 payment made by the appellant directly to Mr. Doyon through a cheque dated December 6, 1993. The assessment is for failure to comply with the requirement to pay of October 29, 1993.
[35] Mr. Doyon testified that this was also a payment of salary, specifically the salary the appellant had agreed to pay him for six months when he had to live in Florida to receive medical treatment but continued to handle the appellant's business from there.
[36] Since counsel for the appellant made the same arguments in respect of this assessment as in respect of the assessment discussed under point IV above, the assessment is confirmed and the appeal is dismissed for the same reasons.
[37] In short:
- the appeal from the assessment for $1,991.03 made under the Income Tax Act, notice of which is numbered 29832 and dated May 30, 1994, is dismissed;
- the appeal from the assessment for $3,200.00 made under the Income Tax Act, notice of which is numbered 29833 and dated May 30, 1994, is dismissed;
- the appeal from the assessment for $1,757.16 made under the Income Tax Act, notice of which is numbered 29834 and dated May 30, 1994, is allowed and the assessment reduced to $1,401.40;
- the appeal from the assessment for $14,600.00 made under the Income Tax Act, notice of which is numbered 29838 and dated July 21, 1994, is dismissed; and
- the appeal from the assessment for $31,000.00 made under the Income Tax Act, notice of which is numbered 29839 and dated July 21, 1994, is dismissed.
[38] The whole with costs being awarded to the respondent.
Signed at Ottawa, Canada,
this 10th day of October 1997.
"P. R. Dussault"
J.T.C.C.
[OFFICIAL ENGLISH TRANSLATION]
Translation certified true on this 5th day of March 1998.
Benoît Charron, Revisor
[1] It seems that the appellant was sent more than one requirement at different addresses. See the respondent's document (Exhibit I-1), tab C.
[2] A payment date is not indicated in notices of assessment #29832, #29833 and #29834.
[3] The wording of the English version of paragraph 224(1.1)(b) seems clearer in this regard.
[4] See also the decision by Cullen J. of the Federal Court—Trial Division in the same case, 90 DTC 6076, and the decision by Joyal J. of that Court in The Queen v. Leung, 93 DTC 5467.
[5] Respondent's document (Exhibit I-1), tab D, pages 22-23.
[6] Id., page 21.
[7] See article 553 of the Quebec Code of Civil Procedure.
[8] In this regard, see St-Cyr v. Société d'Administration et de Fiducie et al. and His Majesty The King, mis en cause, [1951] C.S. 245 (Que. Sup. Ct.), and Sun Life Assurance Co. of Canada v. Canada, [1992] 2 C.T.C. 315 (Sask. Q.B.).