REASONS FOR JUDGMENT
Rossiter A.C.J.
Background
[1]
On May 23, 2012, the Minister of National
Revenue (“Minister”) assessed the Appellant an amount on account of payroll
deductions payable by the Great Canadian Pub Inc. ("GCPI") pursuant
to subsection 227.1(1) of the Income Tax Act. On that same date, the
Appellant was issued a second Notice of Assessment enjoining him to pay the
amount of $18,713.77 in respect of the GCPI’s failure to remit taxes as
required under section 228(2) of the Excise Tax Act. Penalties and
interest were added to both.
[2]
The Appellant filed Notices of Objection for each
assessment on July 6, 2012 and the Minister issued Notices of Confirmation on
April 12, 2013. The parties subsequently filed Notices of Appeal and Replies and
the issues were joined.
[3]
The GCPI operated a bar in Moncton, New Brunswick, from October 2007 to December 2009. Prior to opening, a presentation was
given by Timothy Marney (“Marney”), the GCPI’s incorporator, during the summer
of 2007 to a group of potential investors, which included the Appellant, at a
meeting in Moncton, New Brunswick. On November 7, 2007, the Appellant became a
shareholder of the GCPI having purchased one hundred (100) Class “B” Common
shares of the company for a sum of $10,000. This share purchase was completed
by the GCPI’s legal counsel. At the time, the Appellant did not know Marney or any
other member of the GCPI’s management personnel.
[4]
Marney and his common-law wife,
Geneviève Richard ("Richard"), managed the GCPI from the outset.
Richard was the GCPI’s bookkeeper and looked after the staffing of the
business. Holding other full-time employment at the time, the Appellant was not
involved with the business operations, nor was he employed by the GCPI at any
point. In fact, initially there was nothing required in terms of business
involvement other than his $10,000 investment.
[5]
Shortly after the business opened, the Appellant
became an authorized signatory at the company’s bank, which gave him the
authority to sign cheques. In his mind, he was only given such authority
because at the time two persons were needed to sign cheques. He did not have
any involvement in the day-to-day operations of the business, nor did he regularly
conduct administrative functions. His only interaction with the corporate
accountants came when he signed documents for the filing of income tax returns
in the spring of 2008.
[6]
Shortly after the business opened, the
Appellant, along with Marney and Richard, was also asked by some of the GCPI
shareholders to guarantee a business loan to help keep the company afloat. He
was told that if he did not assist in guaranteeing the loan, all ten
shareholders would lose their investment, including him. Faced with this
alarming scenario, he agreed to comply with their request.
[7]
In December 2007, the Appellant applied for a
small business loan from the Bank of Nova Scotia, whose personnel he had gotten
to know through his employment. A loan in the amount of approximately $225,000 was
subsequently approved and co-signed by the Appellant and Richard. According to
bank documents, Richard was listed as President of the GCPI, Marney, and the
Appellant as a director of the corporation. At the time of the signing of the loan,
the Appellant had no knowledge that the names of the two initial directors of
the GCPI, Marney and John Bastarache, were struck from the Directors’
Registry and that Richard’s name was added in their place. Up to and including
the date of the loan, the Appellant was not asked to sign any other
organizational or business documents on behalf of the GCPI.
[8]
The Appellant never attended any directors’
meetings. Nor were there any shareholders’ meetings held for the appointment of
directors or for any other purpose.
[9]
Notwithstanding the foregoing, the Appellant was
identified as a director of the GCPI on various company-related documents, some
of which the Appellant signed, over an extended period of time. These documents
included a variety of banking certificates, Annual Returns and Notices of
Directors under the relevant Business Corporations Act, the New Brunswick
Corporate Affairs Registry Database, and various Canada Revenue Agency (“CRA”)
forms or documents. The Appellant never filed any of these documents with the appropriate
authorities himself. When signed, he claims that he simply provided his
signature when documents were presented to him by GCPI lawyers or accountants,
the bank, or the CRA, as the case may be.
[10]
The Appellant signed company-related documents
as either Secretary-Treasurer, “Owner” or at times as director. He maintains,
however, that he never intended to be involved in the business as a director or
officer of the company. He was simply making a $10,000 investment and any acts
he may have performed were taken with a view of protecting that investment. He
claims he never really understood the difference between directors, officers or
shareholders or their respective responsibilities and he had no control or
influence on the direction of the corporation.
[11]
With respect to financial information, Marney
did not provide any such information on the GCPI to company shareholders,
including the Appellant, through 2008. Other shareholders would ask the
Appellant about financial information as they were all basically in the dark. However,
as a shareholder, the Appellant claims he was no different that any other in
that he was not receiving appropriate information. His full-time employment and
limited intervention in the internal affairs of the corporation also precluded
him from fully addressing the other shareholders’ concerns. Although he signed
cheques in blank, he asserts that as an authorized signatory he did so as a
matter of convenience, about once a week when he passed by the pub for a beer
after work.
[12]
In September 2009 the Appellant was informed by
Marney that Richard was declaring personal bankruptcy and that she would be
forced to liquidate her shares. The Appellant was instructed by the GCPI's
lawyer to sign a document for the acquisition of Richard's shares, which he did
in the presence of the corporation’s lawyer. On about September 20, 2009, the
Appellant purchased Richard's shares for $1.00. His understanding of the
agreement was that he would have no involvement in the operations of the GCPI,
nor would he be involved with any decision-making, just as before. Both Marney
and Richard remained working at the pub until or about October 15, 2009, at
which point they both resigned and were no longer involved with the business.
[13]
When the Appellant purchased additional shares
in the GCPI, his lawyer provided representation, but the issue of due diligence
was never broached. The only document he reviewed was the minute book. At that
time, he had no knowledge that the company had not remitted the appropriate GST
or source deductions to the CRA. He asserts that he never learned of the
magnitude of the debt problem of the company until January 2010, after the
business ceased operations.
[14]
On September 30, 2009, the Appellant learned
that Marney could not purchase any supplies for the GCPI because the company’s bank
account was frozen following the issuance of a Requirement to Pay by the
Minister to the Bank of Nova Scotia in respect of unremitted GST. The Appellant
was troubled, as he had co-signed the business loan and was a co-signer for
business cheques. He knew that if he did not act quickly, the business would
close.
[15]
In order to unfreeze the account, he was told by
a CRA official that he would need to sign a disclaimer letter. The contents of
this letter were not reviewed with him by any CRA official and notwithstanding
what the document states, the Appellant never sought legal advice prior to
signing the letter. The circumstances at the time were such that he was the
sole common shareholder of the GCPI and needed the bank accounts released. He
signed the document in haste as an owner and shareholder, not as a director, and
faxed it back to the CRA. The bank accounts were subsequently released and the
business could continue to operate. The Appellant asserts this was the first
time he became aware of any debts by GCPI to the CRA. At the time the Appellant
took over Richard’s shares, the corporate debt situation was never disclosed to
him or any of the other shareholders.
[16]
After signing the CRA disclaimer letter and the
departure of Marney and Richard, the Appellant attempted to find investors to
take over the business for the paltry sum of $1.00. He had a full-time job
working twelve hours a day and couldn’t run the business because he didn’t have
the requisite know-how. The Appellant was eventually introduced to two persons
who were interested in running the business, Shelley Richard and Angela
Niles. When they arrived at the pub to take over operations, they asked how to
operate the lights and the alarm and asked to see the paperwork for the
business. The Appellant was so uninvolved in the business he could not even
show them where the paperwork was, how to turn on the lights or where the alarm
was located.
[17]
On December 31, 2009 the Appellant received a
telephone call from Shelley Richard advising that New Brunswick Hydro had
turned off the power and that the business was closed. The Appellant proceeded
to call the bank and advised them that the business was closed. He asked that
the assets be secured for the bank and CRA.
[18]
The Appellant never realized he was personally
liable for the CRA debt until after the business was closed. In January 2010,
following the business closure, the Appellant became aware that someone was
holding him out as a director of the GCPI and that corporate records had been
given to the CRA to that effect. At its request, the CRA later received the corporate
minute book from the Appellant.
[19]
After the business closed, Marney tried to resume
operations as a lounge under the banner of “Great Canadian Pub” or “Great
Canadian Pub Lounge” a few blocks away from the original location. This was
eventually unsuccessful and closed.
Issues:
1.
Was
the Appellant a de jure or de facto director of the GCPI as of
January 1, 2009 and therefore liable under subsection 227.1(1) of the Income
Tax Act and subsection 323(1) of the Excise Tax Act?
2.
If
so, can the Appellant rely on the due diligence defense provided for under
subsection 227.1(3) and subsection 323(3) of the Income Tax Act and
Excise Tax Act, respectively?
3.
What
are the applicable limitation periods and were the respective assessments
time-barred?
Position of the
Appellant:
[20]
The Appellant takes the position that he was
neither a de jure director nor a de facto director of the
GCPI as of January 1, 2009. If this Court finds that he was indeed a
director, he submits in the alternative that he exercised reasonable care such
that subsection 227.1(3) of the Income Tax Act and subsection
323(3) of the Excise Tax Act are engaged. Further, the Appellant asserts
that notwithstanding the foregoing, each of his respective assessments was
issued outside the applicable two-year limitation period and is therefore invalid.
Position of the
Respondent:
[21]
Contrary to the Appellant, the Respondent
asserts that the Appellant was in fact a de jure director or a de facto
director, and therefore liable under subsection 227.1(1) of the Income Tax
Act and subsection 323(1) of the Excise Tax Act. Further, the
Respondent asserts that the Appellant did not conduct himself diligently in the
circumstances. The Respondent therefore contends that subsection 227.1(3) of
the Income Tax Act and subsection 323(3) of the Excise Tax Act
are not engaged. Finally, the Respondent takes the position that the assessments
were issued within the two-year limitation period.
Applicable
Statutory Provisions:
[22]
Under the Income Tax Act, a director may
be held personally liable for a corporation’s failure to deduct or remit
amounts required by law pursuant to subsection 227.1(1), which provides as
follows:
227.1 (1) Where a corporation has failed
to deduct or withhold an amount as required by subsection 135(3) or 135.1(7) or
section 153 or 215, has failed to remit such an amount or has failed to pay an
amount of tax for a taxation year as required under Part VII or VIII, the
directors of the corporation at the time the corporation was required to
deduct, withhold, remit or pay the amount are jointly and severally, or solitarily,
liable, together with the corporation, to pay that amount and any interest or
penalties relating to it.
[23]
The limitations with
respect to this liability are found in subsection 227.1(2):
227.1 (2) A director is not liable under subsection 227.1(1), unless
(a) a certificate for the amount of the
corporation’s liability referred to in that subsection has been registered in
the Federal Court under section 223 and execution for that amount has been
returned unsatisfied in whole or in part;
(b) the corporation has commenced
liquidation or dissolution proceedings or has been dissolved and a claim for
the amount of the corporation’s liability referred to in that subsection has
been proved within six months after the earlier of the date of commencement of
the proceedings and the date of dissolution; or
(c) the
corporation has made an assignment or a bankruptcy order has been made against
it under the Bankruptcy and Insolvency Act and a claim for the amount of the
corporation’s liability referred to in that subsection has been proved within
six months after the date of the assignment or bankruptcy order.
[24]
Where subsection 227.1(1) of the Income Tax
Act is found to apply, a due diligence defence may be mounted by the
director under subsection 227.1(3):
227.1 (3) A director is not liable for a failure under subsection 227.1(1)
where the director exercised the degree of care, diligence and skill to prevent
the failure that a reasonably prudent person would have exercised in comparable
circumstances.
[25]
The assessing power of the Minister is generally
subject to a two-year limitation period, as referred to in subsection 227.1(4):
227.1 (4) No action or proceedings to recover any amount payable by a
director of a corporation under subsection 227.1(1) shall be commenced more
than two years after the director last ceased to be a director of that
corporation.
[26]
Under the Excise Tax Act, the
corresponding directors’ liability provision is subsection 323(1):
323. (1) If a corporation fails to remit
an amount of net tax as required under subsection 228(2) or (2.3) or to pay an
amount as required under section 230.1 that was paid to, or was applied to the
liability of, the corporation as a net tax refund, the directors of the
corporation at the time the corporation was required to remit or pay, as the
case may be, the amount are jointly and severally, or solitarily, liable, together
with the corporation, to pay the amount and any interest on, or penalties
relating to, the amount.
[27]
The limitations with respect to that liability
are expressed in subsection 323(2) as follows:
323. (2) A director of a corporation is not liable under subsection (1)
unless
(a) a certificate for the amount
of the corporation’s liability referred to in that subsection has been
registered in the Federal Court under section 316 and execution for that amount
has been returned unsatisfied in whole or in part;
(b) the corporation has
commenced liquidation or dissolution proceedings or has been dissolved and a
claim for the amount of the corporation’s liability referred to in subsection
(1) has been proved within six months after the earlier of the date of commencement
of the proceedings and the date of dissolution; or
(c) the corporation has made an
assignment or a bankruptcy order has been made against it under the Bankruptcy
and Insolvency Act and a claim for the amount of the corporation’s liability
referred to in subsection (1) has been proved within six months after the date
of the assignment or bankruptcy order.
[28]
Similarly to the Income
Tax Act, a director may invoke a due diligence defence where his liability
is engaged under subsection 323(1):
323. (3) A director of a corporation is not liable for a failure
under subsection (1) where the director exercised the degree of care, diligence
and skill to prevent the failure that a reasonably prudent person would have
exercised in comparable circumstances.
[29]
Finally, a two-year
limitation period is applicable pursuant to subsection 323(5):
323. (5) An
assessment under subsection (4) of any amount payable by a person who is a
director of a corporation shall not be made more than two years after the
person last ceased to be a director of the corporation.
Analysis:
[30]
In Mosier v. R., [2001] G.S.T.C. 124, ACJ
Bowman, as he then was, states that for the purposes of directors’ liability
under the Income Tax Act and Excise Tax Act, a director may be a de jure
director or de facto director. A de jure director is an
individual who has been appointed as such pursuant to the corporate law of the
jurisdiction in which the body corporate was created or continued, as the case
may be. But a de facto director, as ACJ Bowman notes, can exist in
two forms: (i) one who is ostensibly duly elected but who may lack some
qualification under the relevant corporate law, or (ii) one who simply assumes
the role of director without any pretence of legal qualification.
De Jure Director
[31]
As noted herein, an individual becomes and
ceases to become a de jure director according to the corporate law
of the jurisdiction in which the corporation was created or continued. In this
particular appeal, the applicable jurisdiction is New Brunswick, and the applicable
statute is the Business Corporations Act of that province. Subsection
63(3) of that Act reads as follows:
63. (3) A person who is elected or
appointed a director is not a director unless
(a) he was present at the meeting when he was
elected or appointed and did not refuse to act as a director, or
(b) if he was not present at the meeting when he was
elected or appointed,
(i) he
consented to act as a director in writing before his election or appointment or
within ten days thereafter, or
(ii) he
has acted as a director pursuant to the election or appointment.
[32]
Moreover, section 74 of the Act provides
as such:
74. An act of a
director or officer is valid notwithstanding an irregularity in his election or
appointment or a defect in his qualification.
[33]
The public registry of directors could lead to a
presumption that one is a director but this presumption may be overcome provided
there is evidence the person never consented to be a director.
[34]
The Tax Court of Canada has previously held that
a person who was never made aware that they were a director, and did not
consent to be a director, is not a de jure director. Justice
Bowman, as he then was, in Lau v. R., [2003] G.S.T.C. 1, found that
one of the two taxpayers in the appeal was not a director because she failed to
sign the consent to act as a director and a form that listed the taxpayer as a
director was signed by a third party in error. She never consented to act as a director,
was never elected director by the sole voting shareholder and, never held herself
out as a director.
[35]
In Hay v. Canada, 2004 TCC 51, the
Minister argued that Mr. Hay was a de jure director. However,
Mr. Hay claimed he was never a director because he never agreed to act in
that capacity. Apparently Mr. Hay was named as a provisional director by
virtue of a form provided with the articles of incorporation despite never having
authorized the incorporator to designate him as such and was only made aware of
this designation three of four years later. In Hay, Mr. Justice
Archambault recognized that in the common law a director must consent either
explicitly or implicitly in order to be considered a director. He held that
because Mr. Hay's designation as a provisional director was made by the
incorporator without his consent, the designation was not valid and he
therefore could not be considered a de jure director.
[36]
The evidence in this appeal discloses that there
was no director's meeting, of any nature or kind whatsoever, by which directors
were appointed. There were no dossiers signed by the Appellant consenting to do
any business as a director. In fact, the Appellant did not even know he was a
director even though he signed some documents to that effect. According to his
own evidence, he was just signing documents, some of which required two
signatures, when asked. The Appellant specifically acknowledged he was one of
two persons with signing authority for cheques for the GCPI but stated firmly
and repeatedly that he did not consent to be a director nor did he intend to be
a director at any time for the corporation. The evidence presented showed that the
directorship appointment of the Appellant was not carried out in accordance
with the applicable statute. Also, there was nothing in the corporate minute
book that showed that his appointment as a director was proper and carried out in
accordance with subsection 63(3) of the Business Corporations Act
of New Brunswick. In April 2012, the shareholders of the GCPI passed a
resolution confirming the Appellant was never a director of the corporation at
any time.
[37]
Based on the evidence it is clear that the
Appellant had not consented to be a director. The Appellant did not know he was
a director until 2010, he did not execute the appropriate documentation to be a
director, and proper steps were not taken by the corporation to appoint the
Appellant as a director. Under the Business Corporations Act of New Brunswick, the Appellant therefore could not have been and was not a de jure
director.
De facto Director:
[38]
In Wheeliker v. R., [1999] 2 C.T.C.
395, the Federal Court of Appeal stated "… by using the word 'directors'
without qualifications in subsection 227.1(1), Parliament intended the
word to cover all types of directors known by law in company law, including,
amongst others de jure and de facto directors." Accordingly,
the Federal Court of Appeal held that the liability for a corporation's failure
to remit taxes can be imposed on individuals who act as directors, even without
a valid appointment.
[39]
The concept of de facto director however
should be limited to those who hold themselves out as directors. Former Chief
Justice Bowman, in Scavuzzo v. R., [2005] G.S.T.C. 199, cautioned the
Court from broadening the scope of de facto directors. In that
case, Scavuzzo resigned as a director of the company but continued to sign
cheques in his capacity as general manager after his resignation. Despite this,
and as reflected in the following passage, former Chief Justice Bowman found
that the Appellant had no involvement in the substantive decision-making of the
business and did not hold himself out as a director to third parties:
27 I think it
will be apparent that one must be careful about the use of the expression de
facto director. It does not cover as broad a field as is sometimes ascribed
to it. It does not, for example, at least for the purposes of the derivative
liability of directors under the ITA and the ETA cover everyone who exercises
authority in the corporation. It may cover persons who although elected as
directors may not be because of some technical requirement. It may also include
persons who hold themselves out as directors so that third parties rely upon
their authority as directors. That is essentially the principle upon which Noël
J.A. based his conclusion in paragraph 20 of the Wheeliker judgment.
[40]
It should be noted that former Chief Justice
Bowman commented on CRA directive RCD‑95‑12 relating to directors'
liability, stating as follows: “Caution should be exercised prior to assessing
an alleged “de facto” director. It is not sufficient that a person sign
cheques for a corporation himself to be considered a de facto director.
The general rule is that it is not appropriate to assess an alleged de facto
director if there are legally appointed directors in office at the relevant
time. The test of de facto directors should be considered only in cases
where a person is representing him or herself as a director. There should be
written evidence of such behaviour available.”
[41]
In Perricelli v. R., 2002 G.T.C. 244,
Justice Miller notes that the determining factor in concluding that a person
could not be considered a de facto director was that the person
"did not believe he is a director and he never thought he had any
authority to advise, influence or control, the management or direction of the
company".
[42]
Justice Archambault in Hay v. Canada, 2004
TCC 51, referring to Perricelli v. R., supra, noted that Mr. Hay
was not a de facto director because he never acted as such nor had
signed any document to that effect and never sat at a board of directors
meeting. Justice Archambault also states that steps taken to satisfy the
requirements of the Excise Tax Act such as the preparation of invoices,
meeting with the auditor, hiring a lawyer and signing cheques were not in themselves
acts of a director. Furthermore, he found that Hay never exercised control over
the other officers of the corporation. He simply followed the instructions of
the vice‑president of the company, acting as his puppet.
[43]
In Mikloski v. R., 2004 TCC 253, the
Minister argued that the Appellant had regularly represented herself in company
documents as a director and thus acted as a de facto director of the
company. These documents include a lease for premises which she signed as a
witness; a Revenu Québec company registration form where her name was entered
in the field reserved for officers and directors of the company; corporate income
tax returns where she signed in areas reserved for directors; and GST and QST
returns and accompanying cheques. Despite all this, she denied that she
intended to represent herself as a director. Justice Paris accepted her
position, stating that he was not convinced that the documents demonstrated
that she intended to represent herself as a director or even signed as a
director, with the exception of the corporate income tax returns. He went on to
state that the position of Secretary, which she identified as on the Revenu
Québec form, or that of any other officer is not equivalent to the position of
director. He states that the role of a director is to manage the company's business
and to make important decisions on its behalf. He found that
Ms. Mikloski's role was very limited and inconsistent with that of a
director.
[44]
The facts in the case at hand establish that the
Appellant was a shareholder only. He testified unequivocally that his
involvement with the GCPI was for investment purposes only. He attended a
prospective investors meeting at the invitation of others and he did not really
know the principals running the business. He was clear in his evidence that he
did not at any time give his consent to be a director. He did not realize that
he was in fact listed as a director with the Corporations Division of the Province of New Brunswick until very late and once he did, he took every step possible to
have his name struck from the record. He did not execute any documents or complete
any of the required steps to be appointed as a director and there are no
records in the minute book of the corporation indicating that he ever held that
position. Further, all major decisions relating to the business were made by persons
other than the Appellant.
[45]
Certainly the Appellant did sign some banking
documents and certificates showing him as an officer/director, but these
documents were executed by him at the request of others, i.e. lawyers, bankers,
accountants, etc. He was a co-signer for business cheques because two
signatures were required. He signed cheques in blank as a matter of course to
cover rent, payroll, and purchases, and used his credit card to pay for
business supplies and invoices. He signed for the business bank loan, at the
behest of the other shareholders, because the business was failing at the time,
and he was told that if he did not sign for the loan, all the shareholders would
lose their investment, including him. He had no knowledge of who the directors
were, nor that he was appointed as a director by others, or when or if
directors were removed or replaced. There were no directors' or shareholders'
meetings, and there was no motion to validate directors’ appointments or even
to discuss the affairs of the business.
[46]
The Appellant testified that he simply took over
Richard’s shares unbeknownst to him as to how badly the business accounts were
at that time. When the business accounts were frozen, he did not learn of the
significance of the poor debt status of the company until it was too late in
January of 2010. The Appellant asserts that the CRA disclaimer letter, which was
signed by the Appellant as an “owner”, was signed for no other reason than to
unfreeze the accounts of the company. This was maybe done under distress but
certainly in shock and without any real knowledge of the company’s state of
affairs, to the point where he signed the letter without even reviewing it. When
he attempted to have someone else run the business, he did not even know where
the books of accounts were located, or how to turn the lights on or off.
[47]
As noted earlier, the Appellant signed a variety
of corporate-related documents. These documents include Exhibit R‑1,
which is a credit agreement for the GCPI, signed by the Appellant as a
guarantor and as Secretary-Treasurer of the company; Exhibit R‑2, a director
and officer certificate addressed to the Bank of Nova Scotia where the Appellant
is shown as Secretary-Treasurer of the company as well as a director;
Exhibit R‑3, a banking resolution which the Appellant signed in his
capacity as director, officer or member; Exhibit R‑4, which is a banking
document and statement about the business, also signed as Secretary-Treasurer,
along with Richard; Exhibit R‑5, a certificate similar to
Exhibit R‑2 dated February 24, 2009; Exhibit R‑6, a revised
version of Exhibit R-5 where the Appellant is shown as the sole officer and
sole director of the company; and Exhibit R‑8, another director and
officer certificate addressed to the Bank dated November 5, 2009, which again
shows Christopher MacDonald as a director and officer, though this time signed
as an “owner”. Similarly, Exhibit A‑1, Tab 1, is a signed CRA RC59
business consent form signed by the Appellant as a director of the corporation
on December 12, 2008, and Exhibit A‑1, Tab 4, is the
disclaimer letter signed in favour of the CRA in order to obtain the release of
the company's accounts which were frozen following the issuance of a
Requirement to Pay by the Minister to the company’s bank.
[48]
The Respondent notes that there are five exhibits
signed by the Appellant on behalf of the company which third parties, including
Scotiabank, corporate accountants, CRA, and KPMG, may have relied upon to
assert that the Appellant was in fact a director. These exhibits include, for
example, Exhibit R‑16, the company’s 2008 corporate income tax
return which the Appellant apparently filed on November 4, 2008 and which
he signed as director. Another one of these exhibits is Exhibit R‑10,
an email from the Appellant to the corporate accountants dated April 6, 2009, citing
HST problems caused by the previous directors of the company.
[49]
Notwithstanding all of the above documentation,
the Appellant was strong in his evidence to the effect that he was not a
director of the company, that he did not know he was director of the company at
any time, and that he did not consent to be a director at any time. Certain
corporate documents publicly identify the Appellant as a director of the
corporation, but he did not provide his consent thereto at any time. He
appeared to be an individual who was somewhat naïve. His conduct demonstrates
that he was simply trying to protect his investment and those of the other
shareholders. With respect to banking and other documents listing him as a
director, he relied entirely upon the preparers of such documents, who were largely
company solicitors who provided little or no explanation as to the nature of the
documents or the financial situation the company.
[50]
I found the Appellant
to be a forthright and frank individual, who was clear and concise in his
evidence and was unwavering when cross‑examined. He made the appropriate
admissions when they were called for, as regards the signatures provided and his
knowledge of the documents in question. In all of his evidence, he was clear, consistent
and explicit in that he never had any intent to act as a director, was never
asked to be a director, had no knowledge of being a director and only took
steps to protect his investment at all times.
[51]
On the whole of the
evidence, I conclude that the Appellant was not a de facto director.
Having found the Appellant was neither a de jure nor a de facto
director, his liability is not engaged and it is not necessary to address the
other issues raised in this appeal. The appeal is allowed and the matter is
referred back to the Minister for reconsideration in accordance with the above
reasons.
Signed at
Ottawa, Canada, this 20th day of October 2014.
“E.P. Rossiter”
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