N.S. wants $900K in fuel-tax case from directors of bankrupt Maritime Fuels

The Nova Scotia government is seeking more than $900,000 from the directors of a defunct fuel and heating oil companyfortaxes that were collected from customers in the years before it went bankrupt but which were never turned over to the province.

The provincial fuel tax issue is adding to the catalogue of financial woes faced by Maritime Fuels that have trickled out since it abruptly closed down last fall, owing more than $51 million to creditors, including $2.5 million to customers who prepaid for furnace oil but never received it.

Last week, a Nova Scotia Supreme Court judge permitted the province to file a certificate in the case, which will allow it to make a claim against the directors of the company for arrears uncovered during recent audits that examined fuel tax payments between 2018 and 2022, and during a period last fall.

Three of the four directors, including the president of Maritime Fuels, Newfoundland businessman Ivan Cassell, said in a March letter from their lawyer filed in the case that they acted diligently and should not be personally liable for the fuel tax.

This comes as the Maritime Fuels assets are being sold off piece by piece as part of the bankruptcy process, with Justice John Keith approvingthe sale last week of four properties owned by the company in Nova Scotia and New Brunswick.

Maritime Fuels was well known for home heating oil, but it also distributed gasoline and various diesel products, and the audits claim those are the sources ofthe tax shortfall.

In Nova Scotia, gasoline, diesel and a number of other fuels face a per-litre provincial taxwhen sold, although home heating oil is exempt from the fuel tax. The $929,000 at issue in the Maritime Fuels case also includes interest and penalties.

It's not the first time the company has owed fuel tax. A letter from the lawyer for the three company directors said they were shocked in 2022 when they were told the firm owed $1.5 million in unpaid fuel taxes.

The letter said a company controller, who was later reprimanded by Chartered Professional Accountants Nova Scotia, subsequently admitted there were large arrears. The lawyer said Maritime Fuels moved quickly to pay off the outstanding amount.

A fourth director, former general manager Charles Higgins, formally resigned around that time. The province claims he is liable for part of the unpaid fuel tax, but he can't be found.

Under the provincial Revenue Act, company directors can be liable for the unremitted taxes of a corporation, according to a brief filed by the Department of Justice.

Cassell, the Maritime Fuels president, did not reply to a request for comment, and the Halifax lawyer for the three directors declined an interview request.

The fuel tax problems add to the financial intrigue that has gradually spilled out during the bankruptcy process.

Maritime Fuels, through its receiverPricewaterhouseCoopers,is now suing an outside accounting firm, along withan IT company brought in after Maritime Fuels' accounting software and fuel management software crashed in 2020.

The company is accusing both of negligence. It's alleged the IT firm, IMP Solutions, did not properly track accounts receivable, and the accountant, Strong & Associates, did not identify the discrepancies.

The allegations have not been tested in court and no defences have been filed. IMP Solutions' chief operating officer declined to comment. Strong & Associates did not reply to requests for comment.

Last fall, Maritime Fuels also sued another outside accounting firm, Baker Tilly, claiming it signed off on financial statements showing the company was making a profit when there was in fact a $9.5-million shortfall in 2020. Baker Tilly has denied allegations of negligence.