Hamlyn,
T.C.J.:—This
is
an
appeal
from
a
confirmation
by
the
Minister
of
National
Revenue
of
an
assessment
under
the
Income
Tax
Act,
R.S.C.
1952,
c.
148
(am.
S.C.
1970-71-72,
c.
63)
(the
"Act")
wherein
Peter
J.
Hawkins
was
assessed
as
a
director
of
Howard
Carter's
Auto
Services
Ltd.
for
the
failure
of
Howard
Carter's
Auto
Services
Ltd.
to
remit
amounts
of
federal
income
tax,
inter
alia,
deducted
or
withheld
from
wages
and
salaries
paid
in
August,
September,
November
and
December
1983
and
January
and
February
1984.
The
notice
of
assessment
received
by
the
appellant
was
dated
February
1,
1988,
and
was
for
the
amount
of
$8,236.72.
Facts
Howard
Carter's
Auto
Services
Ltd.
was
incorporated
as
a
company
under
the
laws
of
the
Province
of
Nova
Scotia,
with
authorized
capital
of
Forty
Thousand
(40,000)
common
shares
at
One
Dollar
($1)
par
value
for
each
common
share.
On
June
5,
1981,
Peter
J.
Hawkins
was
the
holder
of
2,500
common
shares
and
was
elected
a
director
of
the
company
and
remained
so
for
the
years
1981,
1982
and
1983.
On
February
1,
1984,
a
demand
debenture
was
created
between
the
company
and
its
president,
P.
Michael
Corkum,
in
the
amount
of
$105,000
as
security
for
a
loan
made
by
P.
Michael
Corkum
to
the
company.
On
February
22,
1984,
P.
Michael
Corkum
crystallized
the
debenture
and
Gary
K.
O'Hara
was
appointed
receiver-manager
of
the
company.
Thereafter
the
assets
of
the
company
were
liquidated
as
a
result
of
the
receiver-manager
acting
on
behalf
of
the
debenture
holder.
The
company
has
not
commenced
liquidation
or
dissolution
proceedings
and
the
company
has
not
been
dissolved
nor
has
the
company
made
an
assignment
under
the
Bankruptcy
Act
and
nor
has
any
receiving
order
been
made
against
the
company
under
the
Bankruptcy
Act.
A
certificate
for
the
amount
of
the
liability
of
the
company
was
registered
on
January
27,1987,
and
a
writ
of
fieri
facias
was
returned
on
October
29,
1987,
by
the
sheriff
of
the
County
of
Halifax,
Nova
Scotia,
unsatisfied
in
whole
or
in
part.
The
appellant
is
an
auto
mechanic
by
trade
and
received
his
education
in
England.
He
left
school
at
an
early
age
and
had
little
experience
in
dealing
with
corporations
and
had
little
knowledge
in
relation
to
rights,
responsibilities
and
obligations
of
being
a
director
of
a
corporation.
The
appellant
was
not
involved
in
the
day-to-day
operations
of
the
company
nor
was
the
appellant
responsible
for
any
dealings
with
any
of
the
suppliers
or
creditors
of
the
company
and
the
appellant
did
not
have
any
authority
to
sign
any
cheques
on
behalf
of
the
company
nor
did
the
appellant
have
authority
together
with
another
director
to
sign
any
cheques.
The
appellant's
involvement
with
the
company
was
very
limited.
P.
Michael
Corkum
was
the
president
of
the
company
and
P.
Michael
Corkum
was
the
person
responsible
for
the
day
to
day
operations
of
the
company.
P.
Michael
Corkum
was
responsible
for
ensuring
that
the
suppliers
and
creditors
of
the
company
were
paid
and
was
the
person
who
had
the
signing
authority
at
the
bank
for
the
cheques
of
the
company.
In
1982
the
appellant
was
approached
by
P.
Michael
Corkum
and
asked
if
he
would
arrange
for
a
personal
loan
in
the
amount
of
$5,000.
The
money
was
to
be
used
by
the
company
to
remit
to
Revenue
Canada,
Taxation
the
employee
deductions
that
would
have
been
then
due.
The
appellant
made
the
arrangements
for
this
loan
with
the
Bank
of
Montreal.
The
monthly
payments
were
$190.31.
The
payments
were
to
be
made
by
the
company.
All
of
the
payments
on
this
loan
were
not
in
fact
made
by
the
company
and
the
appellant
had
received
notice
from
the
Bank
of
Montreal,
from
whom
the
loan
had
been
obtained,
that
the
payments
were
in
arrears
and
it
was
seriously
delinquent.
This
notice
was
dated
July
29,
1985.
The
appellant
personally
paid
off
the
balance
of
the
loan
then
due,
approximately
$1,580.
The
final
payment
on
this
loan
was
not
made
until
September
27,1985.
It
was
also
the
recollection
of
the
appellant
that
other
payments
may
also
have
been
made
personally
by
the
appellant
prior
to
receiving
the
letter
from
the
Bank
of
Montreal
dated
July
29,
1985.
In
the
summer
of
1983
the
appellant
decided
that
he
wanted
out
of
the
company.
He
arranged
a
meeting
with
P.
Michael
Corkum
and
Ronald
W.
Burton,
the
solicitor
for
the
company.
This
meeting
took
place
in
August
1983.
The
solicitor
Ronald
W.
Burton
at
the
outset
of
his
evidence
stated
he
was
under
clear
instructions
to
not
disclose
any
solicitor-client
communications
and
these
instructions
came
from
P.
Michael
Corkum.
He
stated
as
he
was
solicitor
for
the
company
he
was
therefore
under
severe
restrictions
as
to
what
he
could
say.
As
a
result
the
only
evidence
of
the
meeting
was
the
letter
and
the
appellant's
interpretation
as
to
what
took
place.
It
is
of
interest
to
note
the
appellant
thought
the
solicitor
was
throughout
protecting
his
(the
appellant's)
personal
interests
and
expressed
surprise
and
dismay
at
the
evidence
of
the
solicitor.
The
appellant
had
indicated
that
it
was
his
impression
that
after
this
meeting
he
was
no
longer
involved
with
the
company
and
this
is
confirmed
by
two
letters;
one
that
was
delivered
to
the
Registrar
of
Joint
Stock
Companies
in
1986
wherein
the
appellant
confirms
that
as
of
September,
1983,
he
had
resigned
his
position
as
an
officer
and
director
of
the
company.
The
other
letter,
dated
August
26,
1983,
was
from
Ronald
W.
Burton
to
P.
Michael
Corkum
with
a
copy
to
the
appellant.
The
letter
confirms
the
thrust
of
the
meeting
that
the
company
would
soon
proceed
without
the
involvement
of
the
appellant.
Upon
returning
home
after
the
meeting,
the
appellant
advised
his
wife
that
he
was
now
out
of
the
company.
Appellant's
Position
The
appellant
argued
three
points:
1.
Revenue
Canada
Taxation
did
not
commence
an
action
against
the
appellant
within
the
two
year
period
referred
to
in
subsection
227.1(4)
of
the
Act;
2.
That
the
appellant
exercised
the
requisite
degree
of
care,
diligence
and
skill
to
prevent
the
failure
by
the
company
to
remit
the
employee
deductions
for
August,
September,
November
and
December
1983,
and
January
and
February
1984
that
a
reasonably
prudent
person
would
have
exercised
in
comparable
circumstances;
and
3.
The
certificates
filed
on
behalf
of
the
Minister
of
National
Revenue
with
the
Federal
Court-Trial
Division
were
not
in
the
prescribed
form
pursuant
to
paragraph
227.1(2)
(a)
of
the
Act.
Respondent's
Position
The
Minister
of
National
Revenue
responded:
1.
The
appellant
was
a
director
of
the
company
throughout
all
relevant
periods
and
continued
so
such
that
the
limitation
period
in
subsection
227.1(4)
was
not
applicable
to
the
matters
before
this
Court;
2.
That
the
appellant
had
not
exercised
the
requisite
standard
of
care,
diligence
and
skill
to
afford
the
appellant
a
defense
to
the
assessment;
and
3.
The
registered
certificates
met
the
statutory
requirements.
Statutory
Provisions
Limitation
Period
Section
227.1(4)
of
the
Act
reads:
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
has
last
ceased
to
be
a
director
of
that
corporation.
Powers
of
a
Director
When
a
Receiver-Manager
is
Appointed
Section
73
of
the
Companies
Act,
R.S.N.S.
1989,
c.
81
reads:
If
a
receiver-manager
is
appointed
by
a
court
or
under
an
instrument,
the
powers
of
the
directors
of
the
company
that
the
receiver-manager
is
authorized
to
exercise
may
not
be
exercised
by
the
directors
until
the
receiver-manager
is
discharged.
Rights
of
a
Director
When
a
Receiver-Manager
is
Appointed
Section
78
of
the
same
statute
provides
in
part:
A
receiver
or
receiver-manager
shall:
(e)
keep
accounts
of
his
administration
that
shall
be
available
during
usual
business
hours
for
inspection
by
the
directors
of
the
company;
.
.
.
Rights
of
Any
Interested
Person
When
a
Receiver-Manager
is
Appointed
Section
77
of
the
same
statute
provides,
in
part:
upon
an
application
by
any
interested
person,
a
court
may
make
.
.
.
(e)
an
order
requiring
the
.
.
.
receiver-manager,
.
.
.
to
make
good
any
default
in
connection
with
the
receiver-manager's
.
.
.
management
of
the
.
.
.
business
of
the
company,
.
.
.;
Jurisprudence
The
case
of
Jules
Maroist
v.
M.N.R.,
[1990]
1
C.T.C.
2521;
90
D.T.C.
1524
involved
appellants
who
thought
they
were
not
directors.
In
that
case
Judge
Garon
of
the
Tax
Court
of
Canada
refers
with
approval
(at
pages
2527-28
(D.T.C.
1529))
to
Denis
John
Cybulski
v.
M.N.R.,
[1988]
2
C.T.C.
2180;
88
D.T.C.
1531
and
cites
Associate
Chief
Justice
Christie
of
the
Tax
Court
of
Canada.
Both
cases
are
relevant
to
the
dispute
before
this
Court:
Associate
Chief
Judge
of
this
Court,
D.H.
Christie,
in
Denis
John
Cybulski
v.
M.N.R.,
[1988]
2
C.T.C.
2180;
88
D.T.C.
1531,
.
.
.
I
am
satisfied
that
reasonable
grounds
existed
for
the
appellant's
belief
that
he
had
severed
his
connection
with
the
Company
as
director
and
secretarytreasurerand
concomitantly
his
responsibility
for
it
when
he
placed
his
resignation
in
the
hands
of
the
Company's
president
and
it
was
accepted
by
him.
This
relieves
him
of
vicarious
liability
for
the
Company's
default
in
remitting
the
deductions
at
source
and
thus,
is
so
a
fortiori
where,
as
here,
the
appellant
was
effectively
barred
from
exercising
influence
over
the
management
of
the
company
by
the
person
in
de
facto
control
of
its
affairs
after
the
resignation
was
submitted.
In
the
instant
case
we
have
a
situation
which
is
somewhat
different
from
that
at
issue
in
Cybulski.
In
the
instant
case
the
appellant
believed
in
good
faith
that
he
had
not
become
a
director
whereas
he
could
have
been,
while
in
Cybulski
the
taxpayer
was
justified
in
believing
he
had
ceased
to
be
a
director
even
though
in
law
he
continued
to
be.
This
divergence
in
the
facts
is
not
such
as
to
justify
the
application
of
a
different
rule
in
assessing
the
appellant's
conduct.
.
.
Analysis
When
if
at
all
did
the
appellant
cease
to
be
a
director
of
the
company?
The
appellant
thought
he
had
severed
his
connection
with
the
company
when
he
told
the
president
and
the
solicitor
he
wanted
out
of
the
company.
The
appellant's
resignation
was
not
in
writing
and
there
appears
to
be
from
the
evidence
no
formal
documentation
of
the
decision,
save
and
except,
the
letter
from
the
solicitor
and
the
letter
to
the
registrar
of
Joint
Stock
Companies.
However,
the
parties
appear
to
have
dealt
with
the
appellant
as
if
the
relationship
had
been
severed.
When
the
receiver-manager
was
appointed
in
February
1984,
the
evidence
clearly
indicates
the
relationship
was
at
an
end.
The
position
of
the
Minister
of
National
Revenue,
that
because
the
appellant
had
the
right
to
inspect
the
books
of
the
receiver-manager
and
that
the
appellant
as
an
interested
person
could
have
instituted
a
judicial
review
of
the
receiver-manager's
stewardship
makes
the
appellant
liable,
is
non-sustainable.
The
appellant
was
not
a
director
at
the
time
of
the
appointment
of
the
receivermanager;
he
had
severed
all
connection
with
the
company
by
the
date
of
the
appointment
of
the
receiver-manager.
He
may
have
been
involved
in
one
act
that
was
related
to
the
creation
of
the
debenture
however
his
recollection
and
knowledge
of
the
debenture
was
such
he
did
not
know
what
he
was
signing
if
in
fact
he
did
sign
it.
His
limited
knowledge
about
corporate
matters
and
about
solicitor-client
relationships
made
him
specially
and
particularly
vulnerable.
Decision
As
of
February
22,
1984,
the
appellant
had
ceased
to
be
a
director
of
Howard
Carter's
Auto
Services
Ltd.
The
date
of
the
notice
of
assessment
was
February
1,
1988.
This
date
is
more
than
two
years
after
the
appellant
ceased
to
be
a
director
of
the
aforesaid
company.
As
such
the
appeal
is
allowed
and
the
assessment
is
vacated.
The
appellant
is
entitled
to
his
costs
on
a
party-and-
party
basis
as
allowed
by
the
tariff.
Appeal
allowed.
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