[OFFICIAL ENGLISH TRANSLATION]
95-3945(IT)I
BETWEEN:
PIERRE BROUILLETTE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeal heard with the appeal of Pierre Brouillette (95-3954(IT)G)
on November 6, 1997, at Montréal, Quebec, by
the Honourable Judge P.R. Dussault
Appearances
Counsel for the Appellant: Roberto T. De Minico
Counsel for the Respondent: Marie-Andrée Legault
JUDGMENT
The appeal instituted under subsections 227(10) and 227.1(1) of the Income Tax Act, notice of which bears number 27980 and is dated January 17, 1995, is allowed, and the assessment is referred back to the Minister of National Revenue for reconsideration and reassessment for the sole purpose of reducing the assessment by an amount of $111.44 incorrectly assessed as legal expenses and of adjusting the interest accordingly.
The appeal instituted under subsections 227(10) and 227.1(1) of the Income Tax Act, notice of which bears number 27982 and is dated January 17, 1995, is dismissed.
Signed at Ottawa, Canada, this 21st day of November 1997.
|
"P.R. Dussault" |
J.T.C.C.
Translation certified true
on this 5th day of June 2003.
Sophie Debbané, Revisor
[OFFICIAL ENGLISH TRANSLATION]
95-3954(IT)G
BETWEEN:
PIERRE BROUILLETTE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeal heard with the appeal of Pierre Brouillette (95-3945(IT)I)
on November 6, 1997, at Montréal, Quebec, by
the Honourable Judge P.R. Dussault
Appearances
Counsel for the Appellant: Roberto T. De Minico
Counsel for the Respondent: Marie-Andrée Legault
MODIFIED JUDGMENT
This judgment modifies the judgment of November 21, 1997.
The appeal instituted under subsections 227(10) and 227.1(1) of the Income Tax Act, notice of which bears number 27981 and is dated January 17, 1995, is allowed, and the assessment is referred back to the Minister of National Revenue for reconsideration and reassessment for the sole purpose of reducing the assessment by an amount of $139.42 incorrectly assessed as legal expenses and of adjusting the interest accordingly
Costs to the respondent.
Signed at Ottawa, Canada, this 17th day of February 1998.
|
"P.R. Dussault" |
J.T.C.C.
Translation certified true
on this 5th day of June 2003.
Sophie Debbané, Revisor
[OFFICIAL ENGLISH TRANSLATION]
Date: 19980217
Dockets: 95-3945(IT)I
95-3954(IT)G
BETWEEN:
PIERRE BROUILLETTE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appearances:
Counsel for the Appellant: Roberto T. De Minico
Counsel for the Respondent: Marie-Andrée Legault
REASONS FOR JUDGMENT
(Delivered orally from the bench at Montréal, Quebec, on November 7, 1997)
P.R. Dussault, J.T.C.C.
[1] The appeals with respect to these files have been heard together.
[2] Docket No. 95-3945(IT)I concerns two appeals. The first is an appeal from an assessment for an amount of $3,960.25 made under section 227.1 and subsection 227(10) of the Income Tax Act and under section 54 of the Unemployment Insurance Act in respect of the source deductions by Boulangerie Lasalle (Verdun) Inc. The Notice of Assessment bears number 27982 and is dated January 17, 1995. The second appeal is from an assessment for an amount of $7,854.78 made under the same provisions in respect of the source deductions by Boulangerie Lasalle (Montréal-Nord) Inc. The Notice of Assessment bears number 27980 and is dated January 17, 1995. The assessment includes an amount of $111.44 claimed as legal expenses.
[3] Docket No. 95-3954(IT)G concerns an appeal from an assessment in the amount of $24,691.53 made under the same statutory provisions in respect of the source deductions by 2745-7332 Québec Inc. The Notice of Assessment bears number 27981 and is dated January 17, 1995. The assessment includes an amount of $139.42 claimed as legal expenses.
[4] At the outset of the hearing, counsel for the appellant indicated that the sole point at issue in the three appeals concerned the two-year limitation period provided for in subsection 227.1(4) of the Income Tax Act. According to him, the Minister of National Revenue (the "Minister") made the assessments after this period.
[5] I further note that counsel for the respondent acknowledged that the legal expenses included in the assessments, notices of which bear numbers 27980 and 27981, must be cancelled.
[6] The Court's jurisdiction over the appeal from the assessment in respect of the amounts owed under the Unemployment Insurance Act is also not contested by respondent's counsel.
[7] To return to the sole question at issue, it may be noted that subsection 227.1(4) of the Income Tax Act provides as follows:
No action or proceedings to recover any amount payable by a director of a corporation under subsection (1) shall be commenced more than two years after the director last ceased to be a director of that corporation.
[8] In The Queen v. Kalef, 96 DTC 6132 (F.C.A.), at pages 6134 and 6135, the Federal Court of Appeal correctly indicated that, in order to determine when a person has ceased to be a director, one must look to the applicable corporate legislation for guidance.
[9] According to the documents submitted in evidence, in particular, Exhibits I-1, I-3 and I-5, the three companies in question were subject to Part IA of the Quebec Companies Act. Section 123.76 of this Act provides as follows:
[Continuance in office]
Notwithstanding the expiry of his term, a director remains in office until he is re-elected, replaced, or removed.
[Resignation]
A director may resign from office by giving notice to that effect.
[10] Section 123.81, moreover, deals with the notice that the company must give of any change in the composition of the board of directors.
[11] With regard to the appeal from the assessment notice of which bears number 27982 concerning the source deductions made by Boulangerie Lasalle (Verdun) Inc., Exhibit I-3 (extracts from the company's minutes book) indicates that the appellant became a director on May 1, 1988. His signature appears on the resolutions of December 12, 1990. Furthermore, on July 2, 1991, he alone signed as director a resolution designating him as president and secretary-treasurer. No other document showing that he gave notice of his resignation at any time was submitted in evidence. In his Notice of Appeal, the appellant claimed that he resigned as director of that company on July 2, 1991, that is, the same day on which he alone signed a resolution designating himself as president and secretary-treasurer.
[12] At an examination for discovery held on May 26, 1997, he claimed at first that he had never been a director of that company. Then, when he was confronted with the fact that he had provided the respondent with a letter of resignation dated July 2, 1991, he changed his version (see pages 25 and 26 of the stenographic notes of the examination for discovery) and admitted that he was a director, and then he went back to his first position claiming that, to the best of his knowledge, he had not been a director (see page 27).
[13] In addition, on August 14, 1992, the appellant also signed on the company's behalf a report in connection with its bankruptcy (see Exhibit I-4).
[14] In his testimony on cross-examination, the appellant admitted that he had been a director in 1989 or 1990 and merely said that his father, Lucien Brouillette, owned many companies at the time and had had him sign a number of documents.
[15] In the absence of further evidence, I find that the evidence before me is insufficient to establish that the appellant ceased to be a director of that company on July 2, 1991, or at any time thereafter, in fact.
[16] The appeal in respect of this assessment is therefore dismissed.
[17] With regard to the appeal from the assessment notice of which bears number 27980 concerning the source deductions made by Boulangerie Lasalle (Montréal-Nord) Inc., Exhibit I-5 indicates that the appellant signed a resolution as a shareholder and a director on June 27, 1986. In his Notice of Appeal, the appellant argued that he had resigned [translation] "from the said company in August 1986." At the examination for discovery on May 26, 1997, the appellant stated that, as far as he knew, he had never been a director of that company (see page 37).
[18] No evidence being adduced regarding the appellant's resignation and the date of his resignation as director of that company, the appeal is allowed for the sole purpose of reducing the assessment by an amount of $111.44 incorrectly assessed as legal expenses. The interest will have to be adjusted accordingly.
[19] Lastly, with respect to the appeal from the assessment notice of which bears number 27981 concerning the source deductions made by 2745-7332 Québec Inc., Exhibit I-2 (extracts from the company's minutes book) indicates that the appellant was elected director on June 25, 1991. The same document shows that the appellant, as director, signed some resolutions on June 28, 1991, and on August 16, 1991. There is no indication in those documents that the appellant had resigned.
[20] According to the testimony of Frank Philippe, a collections officer with Revenue Canada, those documents correspond to the ones in the collection file. They were apparently obtained by another Revenue Canada employee in March 1994.
[21] In his testimony, the appellant said that in June 1991, the company acquired the assets of Boulangerie Lasalle (Verdun) Inc. and that, until June 1992, he had tried to run the bakery and pastry company himself but was unsuccessful. He said that he then returned the company keys to his father, Lucien Brouillette, and resigned as director on June 29, 1992. A letter of resignation was filed in evidence. This is Exhibit A-1, which reads as follows:
[translation]
RESIGNATION
TO: 2745-7332 Québec Inc. June 29, 1992
and Directors
I, the undersigned, submit my resignation as director of the above-noted company, effective upon acceptance by the meeting [sic] of the directors of the said company.
(Signature)
PIERRE BROUILLETTE
[22] In his testimony, the appellant said that his father took back the company assets and that he ceased to have any personal involvement after June 1992. He said he knew nothing of the company's activities thereafter.
[23] At the examination for discovery on May 26, 1997, the appellant said that he thought it was his father who had replaced him as director and that the company had ceased operations in August or September 1992 (see page 15). He also said that he did not know whether his resignation had been approved by a resolution of the board of directors or accepted by the shareholders of the company (see page 15). At the examination for discovery, the appellant also said that he had no idea where the company "minutes book" could be found (see page 12).
[24] I will begin by saying that, despite the appellant's unequivocal statement that he definitely signed the notice of resignation on June 29, 1992, I have serious doubts about this. It is indeed surprising that this document was not found in the company minutes when Revenue Canada conducted an audit in 1994. It is just as surprising that the appellant had such a strong recollection of that event considering that his memory, according to the same examination for discovery, failed him precisely on whether he had been a director of any other company.
[25] In any event, assuming I found that the appellant had all the credibility required on this point, I consider that the notice of resignation of June 29, 1992, is of no effect in the absence of any evidence that his resignation was accepted by the board of directors or the shareholders because, technically, they are the ones who have the power to elect the directors. There is also no evidence that he was replaced or of when he was replaced. The first paragraph of section 123.76 of the Companies Act would therefore probably apply. The appellant relies on the notice of resignation that was filed in evidence. It is common practice to require a document to establish when the appellant's resignation might have taken effect since he himself indicated that his resignation would be effective [translation] "upon acceptance by the meeting [sic] of directors." That evidence was not provided. In the circumstances, I find that the appellant did not establish a point of departure for the limitation period under subsection 227.1(4) of the Income Tax Act.
[26] The appeal from this assessment is therefore allowed for the sole purpose of reducing the assessment by an amount of $139.42 incorrectly assessed as legal expenses. The interest will have to be adjusted accordingly.
[27] As I indicated in Nagy et al. v. M.N.R., 91 DTC 993, at page 998:
One cannot claim the privileges of operating a business through an incorporated company and later completely ignore the provisions and requirements of the governing Act.
[28] In Kalef, supra, the Federal Court of Appeal made a similar comment.
[29] In short, on the point at issue in the three appeals, I cannot accept the appellant's claims since no evidence was provided regarding the time at which he presumably ceased to be a director.
[30] If the books are poorly maintained, as counsel for the appellant pointed out, the government is not the one that can be held responsible.
[31] Costs are awarded to the respondent in respect of docket No. 95-3954(IT)G.
Signed at Ottawa, Canada, this 17th day of February 1998.
|
"P.R. Dussault" |
J.T.C.C.
Translation certified true
on this 5th day of June 2003.
Sophie Debbané, Revisor