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.