Date: 20001002
Docket: A-792-96
CORAM: ISSAC, J.A.
LÉTOURNEAU, J.A.
McDONALD, J.A.
BETWEEN:
JANE HANSON
Appellant
(Plaintiff)
- and -
HER MAJESTY THE QUEEN
Respondent
(Respondent)
Heard at Toronto, Ontario on Monday, October 2, 2000
Judgment delivered from the Bench at Toronto, Ontario
on Monday, October 2, 2000
REASONS FOR JUDGMENT OF THE COURT BY: LÉTOURNEAU J.A.
Date: 20001002
Docket: A-792-96
CORAM: ISSAC, J.A.
LÉTOURNEAU, J.A.
McDONALD, J.A.
BETWEEN:
JANE HANSON
Appellant
(Plaintiff)
- and -
HER MAJESTY THE QUEEN
Respondent
(Respondent)
REASONS FOR JUDGMENT OF THE COURT
(Delivered from the Bench at Toronto, Ontario
on Monday, October 2, 2000)
LÉTOURNEAU J.A.
[1] The Tax Court of Canada ruled that the appellant, as a majority shareholder and director of the Telfer's Restaurant Corporation (874990 Ontario Limited) ("Corporation"), was liable under subsection 227.1(1) of the Income Tax Act ("Act") for the amount of unpaid source deductions, interest and penalties payable by the Corporation in bankruptcy.
[2] At pages 5 and 6 of his decision, the learned Tax Court Judge made credibility findings which were adverse to the appellant as to the extent of her knowledge and experience in business matters generally and in this particular business. We cannot say that these findings are capricious or unsupported by the evidence and, in any event, we are not in a position nor are we willing to second-guess him in this respect.
[3] In addition, he concluded that the appellant knew that she was a director and that she had been so appointed in order to secure for her son and family the majority on the Board of directors. He was also of the view that the appellant was not aware of her responsibilities, but that she made no effort, and failed to take any step, to find out what they were. He quoted with approval this statement of Bonner T.C.C.J. in Black v. The Queen, 93 D.T.C. 1212, at page 1215:
| The appellant cannot take shelter under subsection 227.1(3) by claiming that his actions met the standard of a reasonably prudent person who was ill-informed as to the requirements of the Act. A reasonably prudent person who is aware that he is a director but who is uncertain as to the extent of his responsibilities as director is under a duty to at least attempt to discover what is required of him and to discharge that duty. |
| Nothing in that language [subsection 227.1(3)] suggests the existence of a legislative intention to offer relief to a director who fails to act because he is ignorant of and indifferent to his responsibilities and those of his company ... It is equally illogical to suggest that a director ... ignorant of his responsibilities and who fails to attempt to identify and fulfil them can meet the 227.1(3) standard. |
[4] The appellant takes issue with this statement of the law because it imposes on a taxpayer-director a minimum standard of behaviour, that of making inquiries as to what is or her duties are. She says further that the statement is inconsistent with what was said in the subsequent decisions of this Court, which, admittedly, the Tax Court Judge did not have the benefit of reading. Indeed, what the appellant is offering as a justification for her failure to prevent a breach of section 227 of the Act is that, in fact, she was ignorant of the law.
[5] Generally, ignorance of the law is not a valid excuse for criminal or civil liability. Furthermore, subsequent to the judgment on this appeal, this Court decided Cadrin v. R., [1999] 3 C.T.C. 366. In Cadrin, supra, this Court said, at p. 368, that total passivity based on total ignorance would not allow a taxpayer to escape liability under ss. 227.1(3). Implicit in this conclusion is a minimum duty to remedy one's ignorance.
[6] But, of course, as this Court also said in Cadrin, supra at p. 368, if a taxpayer without knowing the law does what the law requires him or her to do or what he or she should have done in the circumstances, this is sufficient to escape liability although he or she took no steps to ascertain the law.
[7] There is in this case no evidence, as in Cadrin, that the appellant without knowing the law did what she was required to do. She did not stay generally informed about what was happening with the business nor did she inquire when she was told that the business was encountering a "rocky spot" (Transcript, p. 41) or that things were not going great (Transcript, pp. 29-30).
[8] In our view, the decision in Black, supra, is not inconsistent with what was decided in Cadrin, supra. The appellant had to meet the single objective standard of care provided for in ss. 227.1(3) of the Act which takes into account in its application some of the attributes of the person who failed to meet the standard: see Canada v.Corsano, [1999] 3 F.C. 173 (F.C.A.) leave to appeal to the Supreme Court of Canada denied on April 20th, 2000, Soper v.Canada, [1998] 1 F.C. 124 (F.C.A.). She had to do that by leading evidence that, as a director, she exercised the degree of care, diligence and skill to prevent the on-going failure to deduct and remit under section 227.1 of the Act that a reasonably prudent person would have exercised in these circumstances. The Tax Court Judge concluded that she had not done that. We agree.
[9] Accordingly, the appeal will be dismissed with costs.
"Gilles Létourneau"
J.A.
FEDERAL COURT OF CANADA
Names of Counsel and Solicitors of Record
| STYLE OF CAUSE: JANE HANSON |
Appellant
(Plaintiff)
- and -
HER MAJESTY THE QUEEN
Respondent
(Respondent)
| DATE OF HEARING: MONDAY, OCTOBER 2, 2000 |
| PLACE OF HEARING: TORONTO, ONTARIO |
REASONS FOR JUDGMENT
| OF THE COURT BY: LINDEN J.A. |
Delivered from the Bench at Toronto, Ontario on Monday, October 2, 2000
APPEARANCES BY: Mr. John Kutkevicius
For the Appellant (Plaintiff)
Ms. Marie-Thérèse Boris
For the Respondent (Respondent)
| SOLICITORS OF RECORD: KUTKEVICIUS & KIRSH, LLP |
Barristers & Solicitors
67 Yonge Street, Suite 1200
| For the Appellant (Plaintiff) |
| Deputy Attorney General of Canada |
| For the Respondent (Respondent) |
FEDERAL COURT OF APPEAL
Date: 20001002
Docket: A-792-96
BETWEEN:
JANE HANSON
Appellant
(Plaintiff)
- and -
HER MAJESTY THE QUEEN
Respondent
(Respondent)
REASONS FOR JUDGMENT
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