Dipede v. The Queen

Dipede v. The Queen
Court (s) Database
Tax Court of Canada Judgments
Date
2004-02-05
Neutral citation
2004 TCC 100
File numbers
2001-2041(GST)G
Judges and Taxing Officers
Theodore E. Margeson
Subjects
Income Tax Act
Part IX of the Excise Tax Act (GST)
Decision Content
Dockets: 2001-2041(GST)G
2001-2042(IT)G
BETWEEN:
ROCCO DIPEDE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
____________________________________________________________________
Appeals heard on October 27 and 28, 2003, at Toronto, Ontario.
Before: The Honourable Justice T.E. Margeson
Appearances:
Counsel for the Appellant:
Howard J. Alpert
Counsel for the Respondent:
Sointula Kirkpatrick
____________________________________________________________________
AMENDED JUDGMENT
Whereas on the 5th day of February, 2004 a formal Judgment with Reasons for Judgment were mailed to the parties regarding the above appeals;
And whereas an error was made at page 3 of the Reasons for Judgment whereby the first year in paragraph 15 should read "1997" instead of "1979";
Please substitute page 3 of the Reasons for Judgment with the attached amended copy.
Signed at Ottawa, Canada, this 16th day of February 2004.
"T.E. Margeson"
Margeson, J.
Dockets: 2001-2041(GST)G
2001-2042(IT)G
BETWEEN:
ROCCO DIPEDE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
____________________________________________________________________
Appeals heard on October 27 and 28, 2003, at Toronto, Ontario.
Before: The Honourable Justice T.E. Margeson
Appearances:
Counsel for the Appellant:
Howard J. Alpert
Counsel for the Respondent:
Sointula Kirkpatrick
____________________________________________________________________
JUDGMENT
The appeal from the assessment made under Part IX of the Excise Tax Act, notice of which is dated April 1, 1999 and bears number 47695, is dismissed.
Further, the appeal from the assessment made under subsection 227.1(1) of the Income Tax Act, is dismissed.
The Respondent shall have its costs on a regular party-to-party-basis.
Signed at Ottawa, Canada, this 5th day of February 2004.
"T.E. Margeson"
Margeson, J.
Citation: 2004TCC100
Date: 20040205
Dockets: 2001-2041(GST)G
2001-2042(IT)G
BETWEEN:
ROCCO DIPEDE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Margeson, J.
[1] This is an appeal from an assessment by the Minister, notice of which was dated April 1, 1999, which assessment was confirmed on or about April 10, 2001. By this assessment the Minister assessed the Appellant for federal income tax deducted at source but not remitted by All Trades Estimating Ltd. ("Corporation"), together with penalties and interest thereon as set out in Schedule "A" of the Amended Reply.
[2] The Appellant takes the position that he was not responsible for the indebtedness of the Corporation under the provisions of section 227.1 of the Income Tax Act ("Act") or section 23(1) of the Excise Tax Act ("E.T.A.") as he was never a director of the Corporation. In the alternative, if he should be found to have been a director of the Corporation, he exercised the necessary skill and due diligence expected of him in the circumstances. He relied upon the provisions of subsection 227.1(3) of the Act.
[3] In the Notice of Appeal the Appellant had also taken the position that the Minister had not complied with the provisions of subsection 227.1(2) of the Act which was a prerequisite to making an assessment against the Appellant. Therefore, the assessment against the Appellant should be vacated.
[4] He also argued that the amounts contained in the assessment were in error and were based upon an erroneous determination of the assessments and that the Corporation had made all payments to Revenue Canada as were required to be made by it and there was no amount owing by the Corporation. However, these arguments were not relied upon by the Appellant at the time of trial.
Evidence
[5] The Appellant testified that he was born in 1939 in Italy and came to Canada on April 21, 1960. In Italy he received only a grade 5 elementary education, spoke no English when he arrived and even today only speaks a very small amount of English. He cannot read English and has taken no further schooling in Canada.
[6] He went to work in Canada as a labourer in factories for a couple of months and then went into the contracting business until 1979. He became a carpenter in 1965 or 1966, worked a year for himself and then in the year 1984 he went to work with Lisgar Construction Company as a carpenter. He met Santino Facchini ("Facchini") at work, he also was a carpenter. He met Marcellinus MacNeil ("MacNeil") in August 1985. He was looking for a carpenter foreman. The Appellant was hired as an employee for a year and was paid the union rate while working for the Corporation.
[7] In 1986, around the month of May, he talked to MacNeil about joining the business. The Appellant thought about it and thought that he would make more money. He agreed to become part of the business. Facchini also agreed to be part of the business.
[8] The Appellant was told that he would do outside work and that he was to be a foreman and carpenter. Facchini was to do the same thing. MacNeil was to do the inside work, the office work, pay the bills and do the estimates. The Appellant could not look after the office because he could not read or write in English.
[9] He believed that he was to be a shareholder. He was part of the business but no one explained to him what that meant. He was never told that he was going to be an officer or a director and he does not know what the duties of such persons would be.
[10] MacNeil did tell him that he would be a Vice President. He did not know what a Vice President or Treasurer did. He put no money into the business at first. He signed a book where he was told to sign and he did not know what it was about. He did not ask anyone to read any of the material sent to him before he signed it. He did not consult a lawyer. MacNeil and his lawyer prepared the documents. He was not told to obtain his own lawyer.
[11] MacNeil handled all of the banking. There was a bank account for the Corporation. Mrs. Maureen Panchuk ("Maureen") was in the office and MacNeil was managing her.
[12] The Corporation dealt with the Bank of Nova Scotia and the account was set up by MacNeil. He admitted that two signatures were needed to sign cheques. MacNeil signed first and then Facchini or himself would sign. The cheques were prepared by Maureen.
[13] This witness said that he came to the office two times a week. He brought in the timesheets, the bills and obtained the pay cheques for the men. He never saw any financial statements for the Corporation. The tax returns were the responsibility of MacNeil. This Appellant signed cheques to Revenue Canada. These cheques were to pay the employees' taxes and to pay the bills and assessments for Goods and Services Tax ("GST"). They were sent out by MacNeil. This witness assumed that everything was done by MacNeil. It was his duty. This witness had not been a shareholder of any other corporation up to that time.
[14] He never recalled a shareholders or directors' meeting being held. He did know that there were three shareholders including himself, Facchini and MacNeil. They had equal shares.
[15] In 1997 the Corporation went into bankruptcy. He looked for another job with another company. The Corporation went out of business. He first became aware of the difficulties in 1997 when MacNeil called them into the company office and said that the Corporation could not survive anymore. The decision to call the trustee was made by MacNeil.
[16] The Appellant had a mortgage on his house. The money went to pay the bank for the accounts of the Corporation. The balance had to be paid off by him after the bankruptcy of the Corporation. Before that the Corporation made the payments. He did not recall his wife or any of the others attending any meetings of the Corporation. He signed documents for the Corporation that were in a book. He saw a tab by his name and he was told to sign. He did not know what the documents were and no one explained anything to him. He trusted MacNeil and he signed after him. His wife also signed some documents even though she does not speak or write English. His wife was told to sign the documents but they were not told anything about them. They thought that they were doing something right.
[17] He was referred to Exhibit R-1, Tab 22 of the Respondent's Book of Documents, which were the minutes of a meeting of the directors of the Corporation held on November 1, 1985. This document appoints the Appellant as a director. First he said he joined the Corporation in 1986 and then he said that he did not recall it. He identified his signature however.
[18] He was referred to Tab 25. He recognized his signature thereon. These were minutes of a meeting of directors held on January 2, 1986. He had no recollection of that meeting. His wife was not an officer. He did not know if Facchini's wife, Adele Facchini, was a director.
[19] He received dividends once. Then he was shown the request to admit at page 3, item 7, which referred to the 1987, 1988, 1989 and 1991 taxation years and he admitted that he received dividends during those years. He understood that they were lucky during the boom period and that was all. Then they started going down again. They only made normal wages (salary).
[20] To his knowledge, he never signed any documents to become a director. He did not recall a meeting in September 1988 with all the shareholders and the wives. He identified his wife's signature at Tab 33. He did not know what the document said.
[21] He was referred to various documents in the Corporation book between Tabs 24 and 71. In most cases he recognized his signature but indicated that he did not know what the documents represented. He also identified the signature of his wife with respect to different documents relating to minutes. He indicated that he had not been at some of those meetings.
[22] Further, MacNeil never discussed with him the contents of the documents nor had his own lawyer explained it to him because he trusted him. When asked why he did not get his own lawyer he said that they were three equal partners according to MacNeil.
[23] His signature was at Tab 45 as well as that of his wife, but he did not know what it said. Further, he was not at any meeting then and he did not know why his wife signed it. It must have been prepared by her lawyer (the corporate lawyer). He did not recall seeing any financial statements of the Corporation and he did not know what an audited statement was. There was an auditor for the Corporation. The accountant for the Corporation had changed a few times. At the beginning it was Peat Marwick and then it was changed to Goldfarb and Shulman and then back to Peat Marwick.
[24] After May 1996 and up to the date of the closing of the business his duties at the Corporation were outside on the construction of buildings. Anything relating to construction was his responsibility. He delivered materials with a truck. He drove the truck and loaded it at the yard where the building supply dealers were and delivered it to the site. He also ordered materials. He was involved in hiring carpenters. They were laid off if there was no new job. He delivered the timesheets to the office on Friday night. After the bankruptcy, he found another job as a carpenter. He was hired on as an hourly employee. He belonged to a union. He can read numbers but he cannot read words. After 1994 he put no more money into the Corporation.
[25] Maureen was the secretary and bookkeeper at the Corporation. He would see her in the office. He would see MacNeil at the office as well. He never discussed the company matters with him. MacNeil told him that everything was fine. In 1997 he first heard that things were not going well for the Corporation. He was told that the Corporation could not survive and would have to dissolve. He did not receive a pay cheque when the Corporation was not doing well. They did not pay anyone. He recalled when Maureen was hired. Usually she gave him the cheques to sign after they were sitting there for a while. He believed that the money was in the bank to cover the cheques. No one told them that there was no money there. MacNeil was responsible for the accounts receivable. He never discussed it with the Appellant. There were other foremen at the Corporation besides MacNeil. They were not supervised and they knew what to do. All three partners were paid the same amount of money.
[26] When the Corporation went bankrupt he went to a meeting of the creditors. He saw David Courtney there from Revenue Canada and the other creditors. He did not meet with him on April 18 at the Corporation's office. He never heard any complaints from the employees about their pay cheques not clearing. He did not know anything about MacNeil's education. His English was good. MacNeil and Maureen looked after sending letters out from the Corporation.
[27] In cross-examination he said that all of his children were born in Canada and were educated here. The 15 year old could read and write English.
[28] He never met MacNeil before he was hired in 1984. He was taken on at an hourly wage. He worked for about a year from August 1985 to May 1986 and then he was asked by MacNeil to become a partner. MacNeil did not mention money. He did not loan money to the Corporation at that time. They had an informal discussion at the jobsite in Mississauga. He did not say anything about being shareholder or director although he knew that he would be a shareholder. MacNeil told him that he would look after the inside and the Appellant would look after the outside.
[29] One day MacNeil told him to go to the lawyer's office to sign documents. There were yellow tabs on the documents and he was directed to sign. He was generally aware that that was part of the process to become a partner. The secretary pointed out to him where to sign. He knew that if the Corporation made money, he would make money. After he became a partner, he received $1,000 a week then $1,500 a week. It was always the same amount.
[30] After he became a partner, he started to sign cheques. He took the workers' timesheets into the office. He might have been at three different jobsites. He ordered materials, acknowledged receipt of them and signed for them. When he started to work at the Corporation, MacNeil was working out of his residence and then they went to two different company offices. When he went to the office he put in the time cards, and signed the cheques. He picked up cheques as well. He would sit at a desk. Sometimes he would sign the cheques there. It was not his office. Facchini used it as well.
[31] Once in a blue moon he would go into the blueprint room to look at drawings. Sometimes he would say what the job was worth. He also ordered materials. Then he said he had no input into how much the concrete would cost, how much the wood would cost, how much wood was required or anything of that nature.
[32] He would not agree that he was the one who decided that Maureen be hired and whether a worker might be hired or not or when he might be laid off. He might have to pick up cheques. He was never in conversation with Mr. Rothman, an accountant with Goldfarb and Shulman, or MacNeil about company business. He saw Mr. Rothman a couple of times at the company's office but he did not know what he was doing there.
[33] He admitted that in many places in Exhibit R-1, (Volume 1), his signature appeared and he signed the originals. Again he said that the documents were in a book, sometimes they were brought to his office and sometimes he saw them at the lawyer's office. He only went to the lawyer's office once to sign documents after he became a partner. After that it was always done at the Corporation's office.
[34] He never asked anyone to read or explain the documents to him. He never sought a lawyer or someone else to explain them to him. He told MacNeil on one occasion that he could not read English. This was in 1986. That was one of the first things that he said to him. He never asked him to explain documents to him.
[35] The Appellant was again referred to Exhibit R-1, Tab 22 and admitted that to his knowledge, this was from the minute book of the Corporation. He was referred to Exhibit R-2, (Volume 2) at Tab 73 and said that his signature and that of his wife appeared there. This was a collateral mortgage that he put on his home in 1991. The Corporation made the payments. The purpose was to secure payment to the bank of monies owing by the Corporation.
[36] He identified the document at Tab 77 as a fixed mortgage for the Corporation signed by him and his wife for $200,000. The bank wanted the money. They took out a mortgage to pay off the loan. In 1994 the bank was worried and asked them to put fixed mortgages on their houses to pay off the loan. They got the mortgage with the London Trust and Savings Corporation and paid off the Bank of Nova Scotia. MacNeil told him that everything was fine when he asked him. That was the extent of his inquiries.
[37] Even after the bank wanted the fixed mortgage and wanted it to be paid off, he did not make further inquiries. He asked Maureen about the Corporation's finances and everybody said that they were fine. He asked MacNeil if there was enough money to pay the cheques and he said that there was. Then he said that he felt that everything was okay because nobody complained.
[38] He was shown the document in Exhibit R-2, Tab 74 and it was accepted as an exhibit. MacNeil or Maureen showed him this letter and said that he had to sign it and he did. He did not know if it was a letter to him or the Corporation. This may have been at a separate time from signing the documents indicated earlier. He identified his signature at Tab 75 and said that this was a letter from the Corporation. He signed it. He did not know who gave it to him to sign. The letter was dated September 20th, 1993 and no one explained it to him.
[39] His wife had to sign the mortgages as well as himself. He knew there was a risk. He knew he would have to pay if the Corporation did not. MacNeil said that in order to obtain a line of credit from the bank they had to take out the mortgages. He went to the lawyer's office in Scarborough and then the company changed to Mr. Shapiro as its lawyer. He met Mr. Courtney from Revenue Canada for the first time in May 1997 when he went to the first meeting of creditors. He never asked the children to read any of the documents to him.
[40] Again he reiterated that he never saw any financial statements from the Corporation and never asked for any. He signed some cheques to Revenue Canada. He knew that deductions had to be sent in for the workers and that there would be GST payable as well.
[41] In May of 1996 he knew that he was a Vice President, that MacNeil was President and Facchini was Vice President. He agreed with being the Vice President. They may have held him out as Vice President but then he said it did not occur to him that he was signing documents as the Vice President. He did not know why his wife had to sign. He asked MacNeil and he told him that it was for the Workman's Compensation Board. He did not ask the lawyers about it.
[42] He received dividends in good years. It was a cheque drawn on the company account and it contained all of the signatures. The Appellant, MacNeil, Facchini, the trustee and Mr. Courtney were at the first meeting of creditors. A woman was running the meeting. Some creditors were there as well. He did not remember Mr. Courtney standing up and asking who were the directors. That was in May 1997. He never met with anyone else from Revenue Canada.
[43] The Corporation rented the space at 315 Renfrew Drive. He and Facchini were approached about being partners about a few weeks apart. He never spoke to anyone from Revenue Canada on the telephone and never met with them at the Corporation's office. When they were told that the Corporation was in trouble he did not indicate that it did not owe this money to Revenue Canada, he merely said that they could not pay it.
[44] The Appellant was referred to Exhibit R-2, Tab 81 which was a letter dated June 13, 1997 to Revenue Canada from Sherwin Shapiro, the Corporation's lawyer. He saw a copy of it. He took a letter from Revenue Canada to his lawyer and his lawyer, in turn, sent a letter to Revenue Canada on behalf of the Corporation.
[45] Further, with respect to Tab 82, he said that a creditor wanted to take a crane as partial payment of what was owing to them and he would have nothing to do with it. He was not asked to swear it but only to sign it, even though it was an Affidavit sworn before Warren Richard Covent.
[46] He never asked MacNeil if he had any qualifications to run the office and the Appellant was unaware if he had any of these qualifications.
[47] In re-direct he was referred again to Tab 81, which was Mr. Shapiro's letter. He did not tell him what to say in the letter and he did not review it with him before he sent it out. He did not know that there was a large amount of funds owing to Revenue Canada. He did not give instructions to send the letters out. He admitted that Mr. Shapiro was the Corporation's lawyer and is still his personal lawyer.
[48] In answer to a question by the Court he said that he knew that he was receiving dividends but he never received any directors' fees. He had the mortgages explained to him by his lawyer but none of the Corporation documents.
[49] After the Court's questions, in response to questions by counsel for the Appellant, he said that his wife was not involved with the Corporation and he did not know why her name was on the Corporation documents.
[50] In response to a question by counsel for the Respondent, he said that only four persons were involved constantly with the Corporation and they were MacNeil, Facchini, himself and Maureen.
[51] Maureen was 46 years of age. She had taken accounting courses and correspondence courses in accounting. When she was employed by the Corporation she had a couple of courses plus her high school accounting diploma. She had also taken shorthand and typing. She started at the Corporation in 1986 or 1987 and she worked with MacNeil as the President. He managed the office. She considered herself to be the bookkeeper and the secretary and MacNeil was managing the office and doing estimates. She also did the accounts receivable. She reported to MacNeil. She did the accounts payable, some reporting, correspondence, quotes and wrote letters. She worked directly with MacNeil and she received instructions from no one else except him when she started there. The Appellant and Facchini were working there as well.
[52] MacNeil looked after the office and Maureen reported to him. When she did the T4 summaries, they were probably signed by MacNeil but she was not sure. She did not remember signing any. She gave them to MacNeil to review. She also did the GST summaries and may have signed them herself. She would have given them to MacNeil with a cheque for his signature. She recorded information in the ledgers. She did the back-up documents as well and the forms. She could have gone to MacNeil with the cheques for him to sign. The cheques needed two signatures and MacNeil signed first. She put them on the Appellant's desk for his signature. Facchini was not there too often and rarely signed cheques. She would put the folders on the Appellant's desk. Two or three times a week he came in and Facchini came in one to two times per month. Facchini was on the job sites most of the time while the Appellant went from site to site, completed time cards, looked after lay-offs and took cheques to the job sites.
[53] Maureen visited the job sites on one occasion only to deliver a lay-off notice. She believed that the corporate tax returns for the Corporation were signed by MacNeil. The Appellant, Facchini and MacNeil were partners. She did not know what that meant. She thought that they were equal partners. She may have called them "the three guys". She had some discussions with Revenue Canada and MacNeil. She discussed these matters with no one else.
[54] On April 19, 1995 there was supposedly a meeting at the Corporation's office with Revenue Canada. She knew that there was a meeting but she did not remember when it was. She would say that Revenue Canada requested it. She probably made arrangements for it but she did not remember who attended. If anyone else besides her talked to Revenue Canada, it would have probably been MacNeil because she reported to him.
[55] After the bankruptcy, Maureen believed that she received another job. She was asked who dealt with the financial problems of the Corporation and she said that it was MacNeil. He dealt with the Bank of Nova Scotia. Sometimes the payroll was not covered and she would have to call the bank and ask for a day's grace. She did the bank reconciliations and filed them away. If a problem arose, she called MacNeil. He handled the correspondence with the bank. The Corporation owed money to Revenue Canada. She knew that in May there was a payment process in place and she discussed it with MacNeil.
[56] The Appellant was difficult to understand and they had to repeat themselves. She had conversations with Facchini. He came in after the sites closed and was there for one to one and a half hours. Sometimes the foreman brought the time cards to the office and occasionally the driver would take pay cheques to the work site. She prepared the general ledger back-up for the income tax and GST matters. It would be with the forms and was filed away by her. She gave them to MacNeil.
[57] Goldfarb and Shulman and Peat Marwick were the Corporation's accountants. Maureen believed that MacNeil changed accountants. She dealt with him daily and MacNeil dealt with the accountants for "the big stuff". She gave them the trial balance and if there were adjusting entries she would do them. The final report would go through MacNeil. The Corporation had a lawyer early on and then Mr. Shapiro became its lawyer. MacNeil dealt with the lawyer.
[58] Maureen did not know if she had seen the company's minute book. She did not have any specific memory of Revenue Canada seeking penalties against the Corporation. If she talked to Revenue Canada she would relay these messages to MacNeil all of the time. She saw a letter that she was supposed to have sent to Revenue Canada but she did not remember seeing it before. If she did, she would have made sure that it was okay with MacNeil before she sent it to Revenue Canada.
[59] In cross-examination, Maureen said that she was interviewed by MacNeil and the Appellant. She would have told them about the courses that she had taken. She did not know who did the talking. The Appellant told her that she was hired when she called back. She saw a lot of the paper that came to the Corporation with respect to income tax and GST. She was the only one there a lot of the time.
[60] She had her own desk at the office and each of the other three partners had their own office. The Appellant used his office when he came in. She knew it was a Corporation and she knew that the shareholders were the owners. Each of the three guys were shareholders. She called them partners.
[61] MacNeil did not visit the job sites a lot. Maureen did not remember specific occasions when he did. The Appellant would go to the estimating room and look at drawings, he made telephone calls from the office, talked to MacNeil and they would go to the estimating room together looking at their drawings and working on them.
[62] Maureen did the bank reconciliations and was aware of the cash flow problems. She made up the cheques for the partners salaries but near the end they were not taking cheques. Sometimes the cheques could not be released. She did talk to Revenue Canada about owing them money. She did not remember any specifics. The reason for the meeting with Revenue Canada was probably because Revenue Canada was concerned about payments.
[63] The final price for a job was held until the last moment so that no one else could be told of the price. She did not know if MacNeil consulted with the Appellant over the pricing or not. She thought that the Appellant was the Vice President and MacNeil was the President. The three of them were partners. The accountants did the returns. She did not see who signed them. There was some kind of payment schedule made with Revenue Canada. The accounts payable were part of that reporting process to Revenue Canada. She talked to MacNeil after each call to Revenue Canada.
[64] The accountants came to the office. They were Elliott Rothman and Arnold Schwartz. They came in at year-end. They sat in the boardroom and talked mostly to her. They might be there two to three days or longer. They might have been there when the Appellant came in. MacNeil never indicated that this debt was not owed. It was just that they could not pay it. He would often be there when either the Appellant or Facchini came in. The Appellant was like a courier. He helped Maureen get all of the paperwork together. He provided most of the information regarding lay-offs and time cards. He was also a foreman and a partner and had signing authority. At one point the bank was reducing their line of credit. She referred to her signature at Exhibit R-2, Tab 76 and said that these were for the outstanding accounts. This was accepted into evidence.
[65] At this point in time, Exhibit R-2, Tab 78 was accepted into evidence. These were the numbers that Maureen provided to Revenue Canada. She was referred to payroll deductions or source deductions. Tabs 79 and 80 were accepted into evidence and she indicated that Tab 80 were the GST returns that she prepared for February and March 1995.
[66] She said that MacNeil never questioned the GST returns or source deduction reports. The Appellant picked up the cheques for the company with respect to the accounts payable and delivered them to her. She never remembered Facchini ever bringing in the cheques. Sometimes the Appellant would call during the day but not Facchini. The lawyers never came to the office and she did not go to their offices. She believed that there was a meeting with Mr. Shapiro about a project.
[67] In re-direct she said that she never remembered the Appellant and Facchini signing the cheques together. She assumed that the Appellant went from site to site picking up time cards. He used the company vehicle.
[68] With respect to Exhibit R-2, Tab 76, she said that she reviewed this letter with MacNeil and likewise, with respect to the documents at Tabs 78 and 79. She would make sure that he knew everything about what was going on with Revenue Canada. With respect to Tab 80, she said that MacNeil would have seen it when the cheque was prepared. She typed all of the correspondence and most of it was from MacNeil.
[69] The Respondent called MacNeil. He said that he started off first with his wife, hired some employees and he also supervised them. They went to a lawyer. They were the only ones involved for the first couple of months, then they hired the Appellant. He was referred to them by someone else. He was not working at the time. He was to supervise all outside work and decide as to what equipment they needed to get the work done. The Corporation rented the equipment.
[70] The Appellant became an employee. He was interested in joining the Corporation and loaned it $50,000. The Corporation paid it back to him. There was no documentation in support of the loan. They knew that they needed more money and he wanted to become a partner. Facchini was also interested in joining the Corporation. At that time MacNeil's wife was taken off of the papers. They discussed the matter over a few weeks. The Appellant would look after the outside work and MacNeil would look after the inside work. They would be 50/50 partners. Then Facchini came in and they were three equal partners. They all put up collateral mortgages. Someone had to be President, Vice President and Secretary Treasurer. MacNeil was the President, Rocco Dipede was the Vice President and Santino Facchini was the Secretary Treasurer. The lawyer told them that they had to have these positions. Three of them were in the lawyers' office together with his wife in order to sign papers.
[71] With respect to directors, the lawyer told all three of them that they had to be on the list of directors. MacNeil had a grade 8 education and took night school courses for blueprint reading, estimating and project management. They talked English to the Appellant. It was hard to understand his English when he was excited but other than that there was no problem. This witness also communicated with Facchini in English. He was unaware of the Appellant's abilities to read and write English. They did what the lawyer told them to do. They understood that each of them were equal partners.
[72] With respect to the decisions of the Corporation, all three of them were well-informed about any meetings and about signing sub-contracts. When they tendered a contract, the Appellant and he would go over the estimates. The Appellant was the expert with respect to supplies of concrete and equipment. The meetings usually took place in the office at the Renfrew Drive address. When he and the Appellant went over the plans or drawings, it would be in the Appellant's office, in MacNeil's office or in any office.
[73] They went over the plans of the buildings that they were to work on. If they were successful in getting the subcontract, there might be changes in pricing. Sometimes the contractor would call him or the Appellant or fax them to tell them that they obtained the contract. He would usually sign the contract and the Appellant usually witnessed it. Ninety percent of the time it was himself and the Appellant. If the Appellant was not available, Maureen would be a witness. This was one way of keeping the Appellant involved and the other was informing him about each project that they tendered on. The Appellant was involved in each contract and in pricing. He signed the payroll cheques. He was involved in just about everything that was going on in the office.
[74] The Appellant had some dealings with Mr. Shapiro in the past and was satisfied with his work. There were always office meetings with him. He was often involved in leases and liens. They met him whenever necessary. Sometimes they had 60 meetings a year at his office. The Appellant and Mr. Shapiro went quite a few times to the office. The three of them went sometimes.
[75] Their auditors were Goldfarb and Shulman and they advised them to put the condominiums in their wives' names. This was verbal advice given to Maureen and she communicated it to them. That included all three of them. The wives came to the lawyer's office. They had to go back to the lawyer's office where the books were located.
[76] Exhibit R-1, Tab 15 was admitted into evidence. The witness said that he saw these documents in the lawyer's office. They were in the minute book. The minute book was a "bound" book. Their first lawyer prepared it from the information given by all three of them. They were partners. Partners and directors are the same thing according to him.
[77] Further pieces of information contained in Exhibit R-1, commencing at Tab 16 to Tab 71 were admitted into evidence and were identified by this witness. He said that they went to the bank many times. They would tell the Appellant what the payroll was and what was coming up and Maureen gave them the cash flow report. The Appellant was quite smart and he knew how much the Corporation needed. This witness admitted that he did not know why their wives signed the document at Tab 31. He never asked why. He signed it and the Appellant and Facchini signed it to appoint the auditors. He had a yearly meeting with the auditors and a year-end meeting. Usually he and the Appellant signed the documents for the contracts. He admitted that he did not know that the wives were Vice Presidents according to Tab 34.
[78] Tab 35 was the minutes of an annual meeting of the shareholders which was taken from the minute book. He signed it and the Appellant and Facchini also signed it. The auditors discussed the finances with them every year. When they got really tight for the last three years they were not paid for seven to nine months of that time. From the cash flow reports, "all three of them knew that they had to accept no pay or die".
[79] They looked at these reports in the office. Facchini would find out when he did not get his cheque and he would ask why. With respect to Tab 38 he said that all three persons signed it and all went to the lawyers' office when it was convenient. Typically they did not see the lawyer. There was a flag on the documents as to where to find it. They knew that they had to be keeping track of everything.
[80] With respect to invoices, he would approve the invoices or the Appellant would. Some times he instructed the lawyer usually with respect to Mechanics' liens and the condominium. No one gave instructions regarding the minute book.
[81] MacNeil indicated that bonuses were paid to all three shareholders as indicated at Tab 46. Their auditors divided the bonus after the meetings. Dividends and bonuses to them were all the same. He, the Appellant and Facchini had several meetings at the lawyer's office discussing money that they had to put into various projects including the bankruptcy and the condominium. The Appellant was on the payroll on an hourly rate according to the union rate. MacNeil received an amount equal to what the Appellant and Facchini were receiving. They were paid for 40 hours a week regardless of what they worked. They had never been involved in a Corporation before the incorporation of All Trades. The Appellant and he had no disagreements about withholding salaries in order to enable them to meet the cash flow problems. The Appellant and he hired the bookkeeper. They interviewed her and they knew that she could do it. The Appellant did not complain to MacNeil about the bookkeeper.
[82] In 1990 there was a downturn in the economy. They had a lot of "hold-back" money owing. Revenue Canada sent them notices and "bugged them". The Appellant and he would know about it. He had a folder and either the original or a copy would go into his file. They discussed whether they had enough money to pay the accounts. The Corporation paid up all of their source deductions and then the government claimed interest.
[83] Between 1990 and the bankruptcy, Revenue Canada was going to their clients and demanding that their money be paid to them. The agent from Revenue Canada was "sneaky" in saying that he would work with them but he did not. He met with all three of them on several occasions at Renfrew Drive, together with their auditors and Mr. Courtney. They showed him their hold-backs and cash flow and they came up with enough money to make a payment. Revenue Canada would not negotiate a reasonable penalty and interest payment. He never attended a meeting by himself with Revenue Canada. The auditors did not always attend. Mr. Courtney and another man came some times from Revenue Canada.
[84] He was referred to Exhibit R-2, Tab 74 which was a letter from the Bank of Nova Scotia regarding the commitment letter of February 18, 1991. The Appellant signed it but this witness did not know why. Tab 75 was a letter to Revenue Canada. This was a Fairness Committee letter signed by the Appellant appealing the penalty and interest. Maureen composed and typed it. The Appellant knew that they had Revenue Canada problems and sometimes Facchini knew. They had discussions in their office and had meetings with Revenue Canada about the debt. He never told the Appellant that things were good when