Giglio v. The Queen, docket 97-2465-IT-G

Date: 19990310

Docket: 97-2465-IT-G

BETWEEN:

JOSEPH GIGLIO,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

Reasons for judgment

Rip, J.T.C.C.

[1] In the mid-1980's Joseph Giglio, the appellant, was building a residence when one Frank Decaria, a supplier of flooring, asked Mr. Giglio if he would be interested in investing in Mr. Decaria's business. Mr. Giglio and his associates who were shareholders in Patersil Incorporated ("Patersil"),[1] an investment company, agreed to invest in Nu-West Hardwood Flooring Contractors Ltd. ("Nu-West"), a corporation owned at the time by Mr. Decaria and one Mr. John Frucci. Patersil acquired one-half of the shares in Nu-West. Mr. Giglio and one John Paterson, also a shareholder in Patersil, became directors in Nu-West together with Messrs. Decaria and Frucci. Eventually Mr. Frucci left Nu-West and Mr. Paterson resigned as a Nu-West director so that each of Patersil and Mr. Decaria was represented by one director. Patersil and the appellant were described as passive investors by Patersil's accountant, Mr. Steven Rose, C.A. Mr. Decaria was the active owner in the business who made most, if not all, of the business decisions, according to Mr. Rose.

[2] Starting in 1991, Nu-West failed to remit source deductions to the Receiver General for Canada that it was required to remit pursuant to subsection 153(1) of the Income Tax Act ("Act"). Mr. Giglio has been assessed pursuant to subsection 227.1(1) of the Act on the amount of tax (and interest) that Nu-West failed to remit in the months of March, April and August 1991 and January, February and March 1992.

[3] Mr. Giglio has appealed the assessment claiming that he exercised the degree of care, diligence and skill to prevent the failure of Nu-West to remit the tax that a reasonably prudent person would have exercised in comparable circumstances, within the meaning of subsection 227.1(3) and, therefore, he is not liable for Nu-West's failures. He also argued that he had resigned as a director of Nu-West some time in October 1991.

[4] In January 1997 my late colleague Judge Sobier heard an application by the Minister of National Revenue ("Minister") pursuant to section 174 of the Act for a determination of the questions, among others, whether, and if so when, the resignation of Mr. Giglio as director of the Nu-West occurred.[2] Sobier, J.T.C.C. determined that Mr. Giglio remained a director of Nu-West at least until 1994.

[5] Judge Sobier heard evidence of events surrounding the issue of Mr. Giglio's purported resignation. Notwithstanding Judge Sobier's determination, Mr. Giglio's counsel led evidence and argued that Mr. Giglio resigned in fact, if not in law, as director of Nu-West before 1992.

[6] Sobier, J.T.C.C. considered the facts before him as well as the provisions, in particular, section 121, of the Ontario Business Corporations Act ("OBCA") dealing with the resignation of a director. (Nu-West was incorporated under the OBCA.) He also reviewed the reasons for judgment in Cybulski v. M.N.R.[3] which appellant's counsel inferred stood for the proposition that an unsigned resignation, on the facts of the appeal at bar, may suffice as a proper resignation. Sobier, J.T.C.C. did not agree. Judge Sobier did state that in certain cases, such as a director handing a written but unsigned resignation to an official of a corporation, it might be argued that subsection 121(2)[4] of OBCA has been satisfied. However, Mr. Giglio did not do that.

[7] A determination made by this Court in accordance with section 174 of the Act is a judgment of the Court and the determination is binding in any appeal by taxpayers named in the application for the determination of an assessment or proposed assessment affected by the determination: subsection 174(4). I cannot, therefore, find—nor would I find on the evidence before me—that Mr. Giglio resigned as a director of Nu-West before 1992.

[8] I shall set out the evidence before me. At all times that Patersil was an investor in Nu-West, Mr. Giglio was a shareholder of Temple Plastics Inc. ("Temple"), a corporation that carried on the business of manufacturing plastic bags. Mr. Giglio started Temple's business in his basement in 1969 and by 1990 Temple had annual sales of $6,000,000 and employed 50 people. At time of trial Mr. Giglio was president and director of Temple.

[9] Mr. Giglio left high school in 1963 after completing grade ten. He worked at several jobs before starting Temple. His business teacher, he explained, was his experience as an employee and a businessman.

[10] Mr. Giglio acknowledged that in 1990 he was aware of the duties and obligations of a corporate director and of his potential liability under the Act if a company of which he was a director failed to deduct, withhold and remit employees' source deductions, but he "did not dwell on it".

[11] Nu-West lacked working capital. Mr. Giglio said that Patersil assisted in financing Nu-West. The company made money some months and lost money other months. Sales increased over the years but often at the expense of profits. Mr. Giglio attended at Nu-West's premises an average of once a month to sign cheques, have coffee and discuss business. Cheques over $2,000.00 required the signatures of both directors, Mr. Giglio and Mr. Decaria.

[12] In any event, Mr. Giglio said, his "involvement" in Nu-West became "less and less". His wife was diagnosed with multiple sclerosis and by 1991 she was confined to a wheelchair. He was diagnosed with diabetes. Nu-West's business was "going nowhere" and "it was time to wind it down". To this end, he had meetings with his and Nu-West's accountant, Steven Rose, and their lawyer, Mr. Magerman.

[13] Mr. Rose attended Nu-West's premises about two or three times a year. He said Mr. Giglio "never attended meetings" of Nu-West. Mr. Decaria, Mr. Rose confirmed, made most, if not all, business decisions. Mr. Decaria ran the company: he hired and fired employees, got the orders and installed the flooring. Mr. Giglio's input in Nu-West was to provide financing and sign cheques.

[14] Even before 1991 Mr. Rose had discussed a director's legal liability with Mr. Giglio. After May 1991, and before September 1991, he discussed in greater detail a director's liability in the event a corporation failed to remit source deductions. He said he "had Mr. Giglio meet his lawyer concerning his risk as director". Mr. Rose was concerned Mr. Giglio was "at risk for something he couldn't control".

[15] Mr. Giglio said he could not walk away from Nu-West. Patersil had "a couple of hundred thousand dollars" invested in the company. Mr. Giglio also advised the other investors of Patersil that he wanted to withdraw from Nu-West but would try to protect their investment.

[16] The accounting and bookkeeping records of Nu-West were a mess, Mr. Giglio complained, so in late 1990 he asked his sister, Betty Giglio, who ran a bookkeeping business, to organize the accounting records and try to put in place a good bookkeeping system. Mr. Rose was of the view that the bookkeeping was "too big a job" for the inexperienced office employee then in charge, identified as Bruna. Mr. Rose thought the records should be computerized and Bruna could not do this. (Nu-West was on a manual system.) Mr. Giglio had confidence in his sister's ability and instructed her to inform him of anything he should know. She said she was to let her brother know of any problems, for example, "if things were not running smoothly" setting up the new accounting system. Ms. Giglio said her brother's instructions were to make sure the system worked well. He never referred specifically, it appears, to the importance of source deductions being remitted on time. Ms. Giglio was to be an "extra pair of eyes" at Nu-West. Ms. Giglio started work at Nu-West in January 1991. Nu-West's year-end was February 28. Mr. Rose was of the view Ms. Giglio worked at Nu-West because they needed a bookkeeper, not because she was to be her brother's surrogate. Indeed, she said, she was to report to Mr. Decaria.

[17] The new accounting system included a payroll program and began operating in January 1991. Ms. Giglio trained Bruna to operate the system. A weekly payroll and a month end report were generated setting out the amount of wages withheld at source and the amount of the cheque to be sent to Revenue Canada. Ms. Giglio explained that Nu-West's employees varied in number. If Nu-West had a large contract, it may have had ten employees; for smaller jobs, it would employ, perhaps two persons. There was no constant number of employees each week and thus the amount of source deductions varied from month-to-month. Thus, the person signing the cheque would not necessarily know if the amount of source deductions was correct for any particular month.

[18] At the end of each month, Ms. Giglio would "check" the payroll "to see if it [was] paid". If source deductions were not paid - and, she testified, during early summer 1991 some payments were made short due to "cash flow problems" - she would try to correct the default, sometimes by making up the shortfall in the next month when there was sufficient cash flow. Ms. Giglio stated that Mr. Decaria knew of the shortfalls; Mr. Giglio did not, and she did not inform him. In March and April 1991 the company failed to remit in full the amounts of source deductions for which it was liable.

[19] Ms. Giglio prepared cheques for Nu-West's suppliers and Revenue Canada. Cheques over $2,000.00 were first presented to Mr. Decaria for signature and Mr. Giglio would be called in "usually once a month" for his signature.

[20] In her examination-in-chief Ms. Giglio declared that she first informed Mr. Giglio in May 1991 that Revenue Canada cheques were not paid. She estimated the arrears at $18,000.00. Mr. Giglio said he was "probably upset" upon receiving news of the arrears in May. Mr. Giglio was "surprised" and encouraged Nu-West to "fix up" its liabilities. He also decided to resign as director, he testified. He said he had "expected Betty to call if there was a financial problem". Ms. Giglio confirmed that once Mr. Giglio was informed of Nu-West's failures to remit "Joe made sure we made payments". By May or June 1991, "Revenue Canada was up-to-date". Mr. Giglio declared "we put money into the company to pay" but the only evidence of additional money being put into the company was the amount of $50,000.00 he and Mr. Decaria each contributed in August 1991. Mr. Giglio also indicated in late spring that he wished to discuss this and other problems with his lawyer and accountant.

[21] Ms. Giglio believes the problem of incomplete payments to Revenue Canada in March and April 1991 was due to a "little confusion with Revenue Canada and our office". It appears Nu-West paid only one-half of the amount of source deductions for which it was liable. Apparently, it ought to have made two remittances per month, not one. "There was confusion whether [we had to make] a simple or double remittance". In the past Nu-West had made single monthly remittances, she said. When Mr. Giglio signed cheques each month he did not "look out" for a Revenue Canada cheque specifically or verify whether the cheque was for the correct amount. He "had no reason to believe the walls were tumbling down."

[22] Both his sister and the appellant testified that he was aware of the problem of arrears in May or June 1991. In cross-examination, Mr. Giglio said that he was advised of the $18,000.00 of arrears in August 1991 and "injected money into the company".

[23] Ms. Giglio also stated that she prepared cheques for March and April 1991 and "assumed it would be signed and mailed in time". She conceded that it "could be" that cheques were prepared and not signed.

[24] In May 1991, when he was reviewing Nu-West's financial statements for 1991 with Mr. Rose and Mr. Decaria, Mr. Giglio saw no improvement in the company's affairs. Mr. Rose expressed concern with Nu-West's long-term viability. The only liability to Revenue Canada on the balance sheet as at February 28, 1991 was the current source deduction; there were no arrears. Mr. Rose believed he had no need to inquire about events after February 28, 1991, in particular, if Nu-West was current with its remittances of source deductions during the period March 1, 1991 to the date of the meeting.

[25] Mr. Giglio said he attended various meetings with his accountant and lawyer, among others, seeking advice and finally concluded that he would try to "clear up" the company and honour its liabilities. (I assume some of these meetings were held in late spring and early summer 1991.) If the business started to do well, that would be "okay" and if not, "it's over". In May 1991, Mr. Rose was also concerned with Mr. Giglio's risk of liability at Nu-West. A number of issues concerned him: Mr. Giglio's will, director's liability and his financial risk at Nu-West. According to Mr. Rose, Mr. Giglio did not have enough control "and I thought he shouldn't be at risk" and should resign as director. He encouraged Mr. Giglio to arrange a meeting with his lawyer, Mr. Magerman,[5] to discuss these problems and to resign as Nu-West director.

[26] Ms. Giglio also testified that in August 1991 Revenue Canada officials informed her that Nu-West's arrears, including interest, were "close to" $20,000.00 or $21,000.00. It appears that these arrears are in similar amounts Ms. Giglio notified her brother about in May. She stated she informed Mr. Giglio that payment must be made. "At the time", she recalled, "he didn't want to put money into the business". Ms. Giglio discussed with her brother the problem of director's liability and the fact Nu-West was "not doing well". She mentioned that he talked to his lawyer "to take care of himself". He finally agreed to pay the arrears and "we prepared partial payments" over several months, as agreed to by Revenue Canada.

[27] According to both Mr. Giglio and Ms. Giglio, he made arrangements to talk to his lawyer and resign "after September" and he would pay for everything up to that date. He said at trial that it was "my responsibility to make sure there was money in the bank account ... and there was".

[28] Ms. Giglio stated she brought five post-dated cheques, each in the amount of $3,000.00, to the North York District Taxation Office in August or September or October 1991, to clear the company's arrears, interests and penalties. The cheques are dated November 30, 1991, January 30, 1992, February 29, 1992, March 30, 1992 and April 30, 1992. (Copies of the cheques were submitted as appellant's Exhibit A-3. The copies were taken from Revenue Canada microfilm and a "void" stamp were then put on each copy.) This was, she recalled, her "last function at Nu-West". Revenue Canada, she said, then lost the cheques and "they didn't get cashed".

[29] In cross-examination, Ms. Giglio acknowledged that she took the cheques to Revenue Canada in January 1992. She said they were not post-dated and "could have been cashed". She said she "found out later" the cheques were lost, although she could not say how she learned of the loss. Ms. Giglio stated that "as far as I know" there would have been sufficient funds in Nu-West's bank account to honour the cheques in November 1991.

[30] Arrangements had been made by Mr. Giglio for Nu-West's bank, Royal Bank of Canada, to pay all cheques issued by Nu-West, including cheques issued to Revenue Canada, whether or not there were sufficient funds in Nu-West's account. Mr. Giglio said the investor group signed guarantees in favour of the bank. He also stated he instructed his sister and Bruna to pay all creditors, "hydro as well as Revenue Canada".

[31] In August or September 1991, after his sister advised him of the arrears, Mr. Giglio met with Mr. and Mrs. Decaria to inform them that he did not intend to provide any more financing for Nu-West and if there was any short fall in the future each of them would have to contribute. Ms. Giglio testified that "from August onward" Nu-West had a cash problem and was paying suppliers before the government. Mr. Giglio said he also informed the Decarias of his intention to resign as a director of Nu-West. After their discussions he and the Decarias agreed that each of them would contribute another $50,000.00 to cover Nu-West's liabilities at the time.

[32] Because of his and his wife's poor health, Mr. Giglio said he did not want to take on any extra work and, instead, wished to reduce his workload. A meeting was arranged at Mr. Magerman's office to discuss various matters of concern, including his health, his proposed resignation as a director of Nu-West and his intention to divest of Nu-West. It appears this meeting was held in October 1991. (There is no evidence when other meetings, referred to earlier in these reasons, took place.) As previously mentioned, Mr. Giglio did not execute his resignation at the meeting. Mr. Magerman was instructed to prepare documents for Mr. Giglio's resignation. Mr. Rose, who also attended the meeting, remembers that Mr. Giglio instructed Mr. Magerman to "do it"; that is, to prepare the resignation. Mr. Giglio recalled that in the past Mr. Magerman would prepare various corporate and other documents and from time to time Mr. Giglio would attend at his office to sign the documents. Mr. Giglio thought the same procedure would be followed with his resignation. Unfortunately, this was not to be. Nevertheless one of Mr. Giglio's positions in his appeal is that he "believed" he resigned as director in October 1991. Mr. Rose stated that Mr. Giglio became even less involved with Nu-West after the meeting but did not lose touch with the company.

[33] Mr. Rose assumed that whatever Mr. Magerman had to do would be done. He talked to Mr. Magerman from time to time after the meeting with respect to Mr. Giglio's other companies, but had "no reason to think he had to follow-up specifically" the question of the resignation.

[34] In my view, these are two main issues that I must decide. Firstly, may Mr. Giglio be relieved of his liability under subsection 227.1(1) of the Act if he believed he had resigned as director when he had not, and secondly, if he cannot be so relieved, did Mr. Giglio exercise due diligence to prevent Nu-West's failures to remit?

[35] With respect to the first issue, appellant's counsel alluded to the reasons for judgment of Christie A.C.J.T.C.C. (as he then was) in Cybulski, supra. Mr. Cybulski and a Mr. Skuce were the directors and shareholders of a corporation in the business of providing sanitation services. In due course, the taxpayer and Skuce quarreled to the extent that on May 1, 1984 Cybulski delivered a written resignation as an officer and director of the corporation effective immediately. On the same day Skuce signed a letter as president of the corporation accepting the resignation. The appellant regarded the letter he received from Skuce as sufficient for his purposes and did not return a copy of his resignation. No successor was elected or appointed. From May 1, 1984 the taxpayer played no role in the affairs of the corporation, although he did unsuccessfully attempt to obtain information in anticipation of a settlement with respect to his shareholder's interest. Any conversation between Cybulski and Skuce boiled down to threats being made by the latter. On September 15, 1984, October 15, 1984 and January 15, 1985 the corporation failed to remit source deductions that it had withheld from employees' wages. The Minister took the

view that subsection 119(2) of the OBCA[6] rendered the taxpayer's resignation invalid and that the taxpayer remained a director at all material times and was hence liable for the unremitted amounts pursuant to subsection 227.1(1). The taxpayer was reassessed accordingly, and he appealed to this Court. Christie A.C.J.T.C.C. was satisfied that:

... apart from subsection 119(2) the appellant would have ceased to be a director on 1 May 1984. His resignation was in writing and I accept that it related to his offices of secretary-treasurer and director. I also accept his explanation regarding why he did not make and retain a copy. His resignation was received by the corporation and in the normal course it would have been effective on receipt. There is no need for a corporation to specifically acknowledge receipt of a resignation in order for it to take effect, but if it decides to do so, as will probably happen in most cases, the wording of the resignation will, as a general rule, prevail over the wording of the acknowledgement in case of conflict.[7]

[36] The taxpayer's appeal was allowed. The taxpayer reasonably thought that he had submitted a valid resignation, and also, Skuce barred him from any involvement in the management of the corporation. He had done what a "reasonably prudent person" would have done in the circumstances.

[37] Even if he had held that Mr. Cybulski was a bona fide director of the corporation at the time of the corporation's failure to remit, Christie A.C.J.T.C.C. was of the opinion that Cybulski was freed of his liability under subsection 227.1(3) of the Act. He concluded:

... While at first blush subsection 227.1(3) suggests a requirement for positive assertion on the part of a taxpayer in order to bring himself within its ambit, this is not necessarily so in all situations. It may well be that a taxpayer would not take positive steps in some circumstances and still be correctly regarded as having "exercised" that degree of care, diligence and skill expected of a reasonably prudent person that creates the protection from liability afforded by the subsection. That obtains in respect of this appeal. I am satisfied that reasonable grounds existed for the appellant's belief that he had severed his connection with the Company as director and secretary-treasurer and 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 this 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.[8]

[38] The facts in Cybulski are quite different than in the appeal at bar and Christie A.C.J.T.C.C.'s reasons in that case have no application to the facts at bar. Mr. Giglio never put his resignation in writing and never delivered anything in writing to an officer of Nu-West indicating his intention to resign, if not his act of resigning, as director of Nu-West. Nu-West never received notice of Mr. Giglio's actual resignation, although it may well be that Mr. Giglio had informed Mr. Decaria, Nu-West's president, that he intended to resign. All that took place was that Mr. Giglio instructed his solicitor to prepare documentation to resign; there is no evidence that such documentation was prepared. There is evidence that Mr. Giglio never signed a letter or notice of resignation. At the same time Mr. Giglio was a knowledgeable person who realized that for his resignation to take effect, it had to be in writing. (It also had to be delivered to Nu-West.) That is the reason he instructed Mr. Magerman to prepare the necessary documents.

[39] I cannot find reasonable grounds existing for Mr. Magerman's belief that he had resigned as director of Nu-West in October 1991. Mr. Giglio did not sever his connection with Nu-West in October 1991, although he became less "involved" with Nu-West after October 1991. There is no evidence that Mr. Giglio's relationship with Mr. Decaria was reduced to that between Messrs. Cybulski and Skuce. There is no evidence the books of Nu-West were not available to Mr. Giglio at all times; if he wished, he could always have confirmed whether Nu-West was current with its payments of source deductions to Revenue Canada. Quite simply, once he instructed Mr. Magerman to prepare his resignation, Mr. Giglio put Nu-West out of his mind although he knew from his past experience as a businessman and his dealings with Mr. Magerman that his signature was necessary to formalize acts having legal effect, including the act of resigning an office. Delivery of the written resignation would be the following step to complete his resignation.

[40] Appellant's counsel argued that Mr. Giglio was an outside director of Nu-West who represented the Patersil interests since he was not involved in the day-to-day operation of the business and attended at Nu-West only once a month. His and his wife's health forced him to reconsider his role in Nu-West. He could not withdraw the money invested in Nu-West and he could not devote time to attending to Nu-West. Therefore, counsel declared, Mr. Giglio had his sister look after Patersil's interests in Nu-West. The fact of engaging Ms. Giglio's services was the degree of care, deligence and skill Mr. Giglio exercised to prevent Nu-West's failure to remit source deductions. He should not be blamed for his sister's decisions to make payments of partial amounts of source deductions without informing him. Mr. Giglio was diligent in getting someone to do the bookkeeping.

[41] The fact that Mr. Giglio signed cheques payable not in the full amount of the source deductions in March and April 1991 is not unreasonable in the circumstances, counsel submitted. There was confusion whether source deductions had to be remitted once or twice a week. Amounts of source deductions fluctuated from month-to-month. Counsel submitted that Mr. Giglio had no reason to question the amount of the cheques. He was not careless. Having regard to the surrounding circumstances and his business experience he could not have been aware there was a problem with the payment of the source deductions. Counsel referred to Drover v. The Queen.[9]

[42] Counsel also referred to Soper v. The Queen.[10] In Soper, the Court of Appeal held that the standard of care laid down for directors in subsection 227.1(3) of the Act is inherently flexible. Directors are not a homogerous group of professionals whose conduct is governed by a single, unchanging standard. The provision embraces a subjective element which takes into account the personal knowledge and background of the directors, as well as his or her corporate circumstances in the form of, among other things, the company's organization, resources, customs and conduct. More is expected, for example, from an experienced business person than an inexperienced person. Robertson J.A., characterized the standard of care in subsection 227.1(3) as "objective subjective":

The standard of care set out in subsection 227.1(3) of the Act is, therefore, not purely objective. Nor is it purely subjective. It is not enough for a director to say he or she did his or her best, for that is an invocation of the purely subjective standard. Equally clear is that honesty is not enough. However, the standard is not a professional one. Nor is it the negligence law standard that governs these cases. Rather, the Act contains both objective elements – embodied in the reasonable person language – and subjective elements – inherent in individual consideration like "skill" and the idea of "comparable circumstances". Accordingly, the standard can be properly described as "objective subjective".[11]

[43] Robertson, J.A. also stated that inside directors are likely to have more difficulty than outside directors in establishing a due diligence defence. To demonstrate due diligence outside directors are not required to establish and monitor a trust account to pay unremitted source deductions. They are, however, required to take some action when becoming aware of facts possibly leading to the conclusion that there could be a potential problem with remissions.

[44] When Mr. Giglio caused Nu-West to engage the services of his sister in January 1991, it was for the purpose of facilitating the move of the company from a manual to a computerized bookkeeping system. There is no evidence that at the time there was any suggestion that the procedure for remissions of source deductions was deficient or wanting, that the question of the remission of source deductions was in the mind of Mr. Giglio or that it was a factor in adopting a new bookkeeping system. That Mr. Giglio took the initiative to make such a move suggests that he was not an ordinary outside director.

[45] When Nu-West failed to make remissions in full in March and April 1991, Mr. Giglio was not informed. Ms. Giglio took it upon herself to decide how the deficiencies would be solved. The procedure, if any, incorporated into the new bookkeeping system to ensure proper payment of source deductions failed. This was a system recommended by Ms. Giglio and obviously approved by the appellant. One would assume that during the first few months of a new system, the principals of the corporation would be a bit more cautious to ensure no "bugs" were in the system. Outside directors with cheque signing authority would normally make inquiries to satisfy themselves the system was operating without problems and, more to the point, that the cheques payable to the Receiver General were in the proper amounts. This Mr. Giglio did not do.

[46] There is also serious confusion in the evidence as to when Mr. Giglio first became aware of arrears in the amount of $18,000.00 for source deductions (plus interest and penalties) and when Nu-West attempted to pay the arrears. Did Mr. Giglio know in May 1991 or later that Nu-West was in arrears or only that the company had failed to remit? Mr. Giglio and his sister both testified he knew about the arrears in May. Ms. Giglio testified that Nu-West paid the arrears by May or June 1991. Later, in cross-examination, Mr. Giglio said he was advised of the arrears in August and he "injected money into the company at that time". (I assume the injection of funds Mr. Giglio refers to is the money he and Mr. Decaria contributed to Nu-West in August.) Mr. Giglio also indicated he signed cheques for Revenue Canada that may not have been forwarded to that Department. However, neither Mr. Giglio nor Ms. Giglio could state with any reasonable certainty, even given the lapse of time between the events and the date of trial, when Mr. Giglio was knowledgeable about events and what payments Nu-West may have made to Revenue Canada in May or June 1991. The cheques included in Exhibit A-3 are dated November 30, 1991, January 30, 1992, February 29, 1992, March 30, 1992 and April 30, 1992.

[47] There is no evidence that Nu-West satisfied the arrears for March and April. The amounts assessed are in respect of amounts not remitted by Nu-West in March, April and August 1991 and January, February and March 1992. If remittances had been made in full in May or June, as Ms. Giglio testified, those months would not be in issue.

[48] On the facts before me I am satisfied that the assessment under appeal is good. With respect to Nu-West's failures to make full remittances in March and April 1991, Mr. Giglio did not exercise the due deligence required by subsection 227.1(3) of the Act. Mr. Giglio was an experienced and successful businessman. At the time he was not concerned with the company's ability or inability to make the payments, although he was aware of his potential personal liability. He was more concerned with installing a good bookkeeping system so that Nu-West's accounts would be in order. It was only when he met his lawyer and accountant sometime near the end of summer 1991 that he realized that the company was facing serious financial problems and he ought to resign. But he did not resign and he knew he had not resigned. He was still a director when Nu-West failed to make remissions in August 1991 and in 1992. The general principles enunciated in Soper support the assessment and not Mr. Giglio's due diligence defence.

[49] The appeal is dismissed, with costs.

Signed at Ottawa, Canada, this 10th day of March 1999.

"Gerald J. Rip"

J.T.C.C.

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