Kempo,
T.CJ.:—This
appeal
concerns
the
respondent's
assessment
of
the
appellant
made
pursuant
to
subsection
227.1(1)
of
the
Income
Tax
Act,
R.S.C.
1952,
c.
148
(am.
S.C.
1970-71-72,
c.
63)
(the
"Act")
for
the
sum
of
$10,004.08
being
the
total
amount
of
tax,
interest
and
penalties
as
a
director
of
Regional
Truck
&
Auto
(1985)
Ltd.
(the
"Company"),
a
company
incorporated
under
the
laws
of
the
Province
of
British
Columbia,
for
unremitted
amounts
on
behalf
of
the
Company
for
the
periods
April
to
June
and
August
to
October
of
1986.
As
the
Court
is
without
jurisdiction
to
deal
with
amounts
alleged
to
be
owing
under
the
Canada
Pension
Act,
the
Unemployment
Insurance
Act
and
the
British
Columbia
Income
Tax
Act,
the
appeal
must
be
restricted
to
the
amounts
alleged
to
be
owing
under
the
Income
Tax
Act
only.
The
Company
was
incorporated
on
December
19,
1985.
The
appellant,
his
brother
Carl
Pidskalny
("Carl")
and
Carl's
wife
Diana
Pidskalny
("Diana"),
were
the
shareholders
and
directors
from
the
outset.
The
appellant
received
ten
per
cent
of
the
issued
shares,
with
the
remaining
90
per
cent
belonging
to
Carl
and
Diana
Pidskalny.
The
business
of
the
Company
was
the
service
and
repair
of
vehicles.
It
operated
out
of
very
modest
premises
in
Kamloops,
British
Columbia.
According
to
the
pleadings,
it
made
an
assignment
in
bankruptcy
on
November
20,
1986.
Its
corporate
operations
lasted
only
11
months.
The
appellant's
brother
Carl,
an
experienced
mechanic,
was
the
driving
and
operational
force
behind
the
whole
business.
Originally
it
had
been
operated
by
him
as
a
sole
proprietorship
during
which
he
had
received
$1,000
from
the
appellant
to
get
it
going.
At
this
point
it
is
appropriate
to
say
that
the
appellant
was
an
entirely
believable
witness.
I
accept
his
testimony
as
an
accurate
and
credible
narrative
concerning
all
of
the
material
facts.
The
appellant
is
37
years
of
age.
With
respect
to
his
education,
he
achieved
grade
ten
in
Manitoba
and
had
taken
an
electronics
course
which
he
did
not
complete
to
certification.
For
the
past
25
years
he
worked
as
a
construction
labourer.
The
first
ten
years
thereof
was
in
municipal
sewer
and
waterworks
installations.
Thereafter
he
was
involved
with
explosives
and
blasting
activities
primarily
above
railways
and
highways.
He
has
never
had,
run,
or
been
involved
in
a
business
of
his
own.
He
has
always
been
an
employee
during
his
working
life.
The
nature
of
the
appellant's
employment
required
short
notice
for
his
attendances
at
the
worksite,
with
lon
periods
of
absences
away
from
his
home
in
Kamploops.
He
knew
nothing
of
auto
mechanics,
and
during
the
early
part
of
his
brother's
business
he
was
its
first,
and
probably
its
best,
paying
customer
for
service
done
on
his
own
car.
The
appellant
said
he
had
previously
loaned
small
amounts
to
his
brother
which
had
never
been
repaid.
On
maxing
the
$1,000
advance
to
him
in
the
spring
of
1985,
he
said
it
was
clearly
on
the
understanding
that,
because
he
never
really
expected
it
to
be
repaid
either,
it
was
not
to
be
a
loan.
Rather,
when
and
if
his
brother
had
sold
the
business,
he
was
to
get
ten
per
cent
of
any
profit
on
the
sale.
On
cross-examination
he
very
clearly
and
without
hesitation
explained
the
understanding
that
if
the
business
was
sold
at,
say,
a
profit
of
$5,000
he
expected
not
$500
plus
the
$1,000,
but
only
$500.
He
acknowledged
this
may
have
been
unusual,
out
that
was
the
deal
as
far
as
he
was
concerned.
Because
his
brother
had
had
a
previous
business
which
had
been
sold
at
a
small
profit,
the
appellant
felt
that
there
was
a
possibility
he
might
have
made
something
back.
However,
for
all
intents
and
purposes,
the
advance
was
essentially
a
gratuitous
accommodation
to
his
brother,
with
no
strings
attached
and
no
real
expectation
of
its
recovery
in
any
form.
In
the
fall
of
the
same
year,
1985,
the
appellant's
brother
told
him
that
he
was
incorporating
the
business,
that
he
was
advised
to
issue
him
ten
per
cent
of
the
shares
because
of
his
aforementioned
promise,
that
he
(the
appellant)
had
to
go
to
the
lawyer's
office
to
sign
some
papers
(this
he
did
on
a
very
brief
attendance)
and
that
he
was
to
be
vice-president.
I
accept
as
a
fact
that
the
understanding
and
expectation
throughout
was
that
the
appellant
would
have
no
involvement
whatever
in
the
business,
and
that
the
shares
and
the
vicepresidency
had
been
offered
and
taken
merely
in
recognition
of
the
arrangement
surrounding
the
$1,000
advance.
The
appellant
at
all
times
wanted
nothing
to
do
with
his
brother's
business,
he
didn't
understand
it
nor
wanted
to,
and
he
was
fully
indifferent
as
to
any
recovery
of
the
$1,000.
As
noted
earlier,
his
employment
required
long
absences
from
Kamloops.
Carl
and
his
wife,
Diana,
“ran
the
show”
which
was
really
a
"hole-in-the-wall"
operation.
The
appellant's
attendances
at
the
shop
were
infrequent
and
solely
for
auto
servicing.
There
were
no
discussions
or
meetings
whatever
in
the
nature
of
shareholder
or
director
concerns.
In
June
of
1986
the
relationship
between
the
brothers
became
strained
because
of
the
appellant's
refusal
to
co-sign,
as
a
shareholder,
a
sought-after
$20,000
bank
loan
to
the
Company.
In
response
to
Carl's
accusatory
allegations
that
the
business
would
have
to
shut
down
and
probably
go
into
bankruptcy
without
the
loan,
the
appellant's
stance
was
that
that
was
okay
with
him,
that
he
never
really
expected
to
see
the
$1,000
anyway
and
that
under
no
circumstances
would
he
put
himself
on
the
hook
for
$20,000
or
any
other
amount.
This
falling
out,
and
the
casting
of
blame
of
probable
failure
upon
the
appellant’s
refusal,
prompted
his
oral
statement
of
intended
resignation.
Very
shortly
thereafter
this
was
followed
by
a
written
one,
delivered
to
Carl,
to
show
he
meant
what
he
said.
I
will
return
to
this
shortly.
Carl
then
began
looking
for
another
shareholder-investor
as
the
appellant
had
also
offered
to
give
up
the
shares
he
didn't
ask
for
in
the
first
place
in
favour
of
such
a
person
if
one
could
be
found.
The
books
and
records
were
apparently
being
kept
and
maintained
by
Diana
at
home.
The
appellant
was
frequently
absent.
He
lacked
knowledge
of
any
sort
of
outstanding
liabilities
and,
in
keeping
with
his
original
intent
of
complete
non-involvement,
made
no
such
inquiries.
He
had
always
regarded
his
vice-presidency
as
an
accommodation
at
Carl’s
instance
and
simply
responded
to
his
request
to
sign
the
papers
at
the
lawyer's
office.
In
his
naivety
and
ignorance
that's
what
he
did,
and
that's
all
he
did.
Returning
to
the
written
resignation,
the
appellant
made
a
single
copy
only
which
he
delivered
to
his
brother
at
the
shop.
The
document
produced
at
trial,
Exhibit
A-1,
may
have
been
only
a
copy
made
up
by
the
appellant
after
Revenue
Canada's
involvement
and
requests
for
proof
of
his
resignation
as
a
director.
This
aspect
of
the
evidence
was
unclear.
The
appellant
expressed
uncertainty
and
confusion
as
to
where
the
first
one
went.
In
any
event
the
document
was
forwarded
to
Revenue
Canada
through
his
lawyers
after
they
had
sent
Carl's
statutory
declaration
attesting
to
the
resignation.
Paragraph
4
of
the
statutory
declaration,
Exhibit
A-2,
dated
July
28,
1987,
declared:
That
in
June
of
1986,
Barry
Pidskalny
resigned
as
an
Officer
and
Director
of
Regional
Truck
&
Auto
(1985)
Ltd.
effective
July
1st,
1986.
On
June
26th,
1986,
Barry
Pidskalny
delivered
a
letter
confirming
his
resignation
to
me
as
President
of
Regional
Truck
&
Auto
(1985)
Ltd.
Exhibit
A-1,
reads
as
follows:
June
25
1986
:
to
Regional
Truck
and
Auto
:
att.
Mr.
Carl
Pidskalny
Be
advised
that
I,
Barry
Pidskalny,
resign
as
vice
president
and
director
of
Regional
Truck
and
Auto
effective
July
1
1986.
Sicerely,
(sic)
B.L.
Pidskalny
“B.L.
Pidskalny”
“June
26,
1986”
The
resignation
had
never
been
registered
or
recorded
with
the
British
Columbia
Registrar
of
Companies,
nor
had
it
been
noted,
recorded
or
entered
on
the
company's
register
of
directors
at
its
registered/records
office
which
was
located
at
the
office
of
the
Company's
lawyers.
The
appellant
was
unaware
that
his
resignation,
to
be
proper,
should
have
been
delivered
to
the
Company's
registered
office.
Rather,
he
said,
Carl
was
the
one
who
had
said
he
was
to
be
vice-president,
not
the
lawyers,
and
therefore
it
was
logical
to
deliver
the
resignation
to
him.
To
recap,
the
resignation
was
as
of
July
1,
1986
and
the
subject
subsection
227.1(1)
assessment
was
dated
January
13,
1989
being
more
than
two
years
later.
The
witnesses
called
by
the
respondent
testified
to
the
effect
that
the
legal
opinions
sought
by
them
as
to
the
legality
of
the
appellant's
resignation
had
not
been
finalized
until
around
July
of
1988.
However
it
was
quite
clear
that
all
of
these
individuals
had
been
made
aware,
at
the
very
outset
of
their
involvement,
that
the
appellant
had
purportedly
resigned
as
of
July
1,
1986.
In
my
view
respondent-counsel's
submission
that
the
two-year
limitation
period
prescribed
by
subsection
227.1(4)
of
the
Act
ought
not
apply
in
this
case
is
without
merit.
The
reasoning
behind
the
submission
was
that
the
com-
mencement
of
the
statutory
limitation
period
in
cases
such
as
this
should
not
begin
until
all
of
the
facts
are
known
and
all
inquiries
and
reasonable
negotiations
thereon
have
ceased.
The
essential
reason
that
this
argument
is
specious
in
this
case
is
that
the
respondent
was
made
and
had
been
aware
of
the
purported
resignation
of
the
appellant,
by
him
initially,
as
early
as
March
of
1987.
Further,
Carl
Pidskalny's
Statutory
Declaration
was
in
their
hands
before
February
of
1988
which
was
still
well
within
the
two-year
period.
For
the
respondent's
officials
to
have
determined
and
maintained
that
the
appellant
had
not
effectively
resigned
as
alleged,
and
thus
having
let
the
two-
year
limitation
slip
by,
was
a
decision
made
at
their
own
peril.
They
enjoyed
unrestricted
investigative
opportunities.
They
had
had
all
of
the
relevant
facts
well
within
the
time.
There
are
no
acts
of
withholding
information
or
of
misrepresentation
on
the
part
of
the
appellant
causing
or
inducing
the
respondent
to
have
been
misled
to
his
detriment,
and
thereby
possibly
attracting
the
principles
of
estoppel.
Suffice
it
to
say
that
I
find
no
reason
on
the
facts
of
this
case
which
would,
or
should,
preclude
or
modify
the
strict
applicability
of
subsection
227.1(4)
of
the
Act.
The
next
question,
then,
concerns
the
validity
of
the
written
resignation
which
the
appellant
had
submitted
to
his
brother,
the
president
of
the
Company.
The
applicable
law
in
British
Columbia,
as
found
in
the
Company
Act,
R.S.B.C.
1979,
c.
59,
subsection
154(1),
154(2)
and
section
156,
reads
as
follows:
Ceasing
to
hold
office
154.
(1)
A
director
ceases
to
hold
office
.
.
.
when
he
(a)
.
.
.
resigns;
(b)
[not
applicable];
(c)
[not
applicable];
(d)
[not
applicable];
(2)
Every
resignation
of
a
director
becomes
effective
at
the
time
a
written
resignation
is
delivered
to
the
registered
office
of
the
company
or
at
the
time
specified
in
the
resignation,
whichever
is
later.
Notice
of
cessation
156.
(1)
Every
company
shall,
within
14
days
after
the
resignation
.
.
.,
file
with
the
registrar
a
notice,
in
Form
11
in
the
Second
Schedule,
of
a
director
ceasing
to
hold
office;
.
.
.
(2)
A
company
that
contravenes
subsection
(1)
commits
an
offence
and
is
liable
to
a
fine
not
exceeding
$50
for
each
day
it
is
in
default.
The
appellant's
written
resignation
had
never
been
filed
in
compliance
with
subsection
156(1)
of
the
British
Columbia
corporate
legislation.
I
agree
with
appellant-counsel's
submission
that
this
failure,
of
itself,
would
not
nullify
a
resignation
otherwise
validly
submitted.
Subsection
156(2)
merely
authorizes
putative
measures
that
may
be
taken
against
the
Company;
it
is
silent
as
to
the
status
of
a
putative
director,
and
does
not
purport
to
negate
the
validity
of
a
resignation.
Counsel
has
relied
upon
the
proposition
of
law
set
out
in
the
last
sentence
of
the
following
statement
of
law
extracted
from
C.E.D.
(West.
3rd)
at
page
37-214
in
support
of
the
legal
validity
of
the
appellant's
resignation:
(g) Resignation
322. A director ceases to hold office when he resigns. A resignation of a director
becomes effective when a written resignation is sent to the corporatio, or, under
the British Columbia Act, when it is delivered to the registered office of the
company of at the time specified in the resignation, whichever is later.67A resignation
is valis without acceptance.68
67 Canada, s. 103; Alberta, s. 103; British Columbia, s. 154(1), (2); Manitoba, s. 103; Saskatchewan, s. 103.
68 Trustee of Richards & Co. v. Coulson, [1937] 3 D.L.R. 304 (Ont. C.A.); Deguise v. Lesage, [1945] Que. S.C. 40.
In
my
opinion,
while
the
appellant
"ceased"
to
be
a
director
when
he
resigned
it
nonetheless
remained
statutorily
ineffective
pending
compliance
with
subsection
154(2).
To
interpret
this
result
otherwise
would
require
a
reading-out
or
disregard
of
the
statutory
words.
I
have
been
provided
with
no
good
reason
or
authority
to
do
this.
Subsection
227.1(4)
of
the
Income
Tax
Act
uses
the
following
terminology:
(4)
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
he
last
ceased
to
be
a
director
of
that
corporation.
[Emphasis
added.]
Of
interest
is
the
highlighted
word
in
the
phrase
"ceased
to
be
a
director"
which
is
almost
identical
to
the
terminology
used
in
subsection
154(1)
of
the
British
Columbia
legislation,
"cease
to
hold
office".
While
the
emphasis
of
both
appears
to
be
in
respect
of
“cessation”,
it
would
be
meaningless
to
view
that
aspect
in
isolation
and
apart
from
the
substantive
matters
pertaining
to
its
legal
effectiveness.
The
resolution
of
the
cessation
of
a
directorship
in
its
full
legal
sense
remains
to
be
resolved
according
to
the
particular
law
of
the
province
or
territory
having
jurisdiction.
Unfortunately
for
this
appellant
his
unawareness
of
and
his
failure
to
comply
with
the
service
requirement
upon
the
Company's
registered
office
effectively
put
his
cessation
of
directorship
into
legal
abeyance.
However
this
abeyance
would
in
my
view
have
terminated
upon
any
form
of
or
attempt
at
compliance
with
subsections
154(2)
and/or
156(1)
of
the
British
Columbia
legislation.
In
the
result
the
appellant
had
not
legally
divested
himself
of
his
directorship
after
July
1,
1986
and
his
two-year
limitative
argument
therefore
fails.
In
my
view,
the
appellant
was
justified
in
believing
he
had
ceased
to
be
a
director
after
July
1,
1986,
like
that
of
the
taxpayer
in
Denis
J.
Cybulski
v.
M.N.R.,
[1988]
2
C.T.C.
2180;
88
D.T.C.
1531
wherein
the
Court
found
entitlement
to
relief
from
the
vicarious
liability
for
the
Company's
default.
the
same
ought
to
apply
to
this
appellant
for
the
post-July
1,
1986
default.
That
does
not
end
the
matter,
however,
as
the
facts
and
circumstances
of
this
appellant
support
his
total
exculpation
of
liability
pursuant
to
subsection
227.1(3)
of
the
Act.
Both
before
and
after
the
purported
resignation
the
appellant
had
no
knowledge
of
the
rights,
responsibility
and
obligations
of
a
directorship.
He
was
and
remained
totally
and
wholly
uninvolved
with
management,
administration
and
day-to-day
operations
of
the
Company.
His
"act"
of
resignation
was
a
signal
to
his
brother
that
he
still
remained
unconcerned
about
any
recovery
of
his
$1,000
advance.
Both
before
and
after
the
resignation
the
appellant's
directorship
was
and
remained
merely
titular.
This
appellant
had
operated
on
reasonable
grounds
throughout
in
his
belief
that
he
was
acting
and
responding
merely
as
an
accommodator
to
his
brother's
needs
and
suggestions.
I
find
that
at
all
times
he
"had
not
one
iota
of
interest
in
the
operations"
of
the
Company
and
that
even
if
he
had
knowledge
of
the
nonremittance
situations
“his
inability
to
have
done
anything
about
it”
corresponds
to
that
of
the
taxpayer
in
L.
Robitaille
v.
Canada,
[1990]
1
C.T.C.
121;
90
D.T.C.
6059
(F.C.T.D.)
at
125-26
(D.T.C.
6062-63).
The
appeal
is
allowed,
with
costs,
and
the
matter
is
referred
back
to
the
Minister
of
National
Revenue
for
reconsideration
and
reassessment
on
the
basis
that
the
appellant
is
not
liable
for
amounts
owing
under
the
provisions
of
subsection
227.1(1)
of
the
Income
Tax
Act.
Appeal
allowed.
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