Taillefer v. Minister of National Revenue, [1996] 1 CTC 2081, 95 DTC 462

Garon J.T.C.C.— These are appeals from assessments issued under subsection 227.1(1) of the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp) ("the Act") and under what was at the time section 68.1 of the Unemployment Insurance Act. The notices of assessment sent to the two appellants were both dated April 21, 1989 and are in respect of the sum of $74,641.63. That total, according to the respondent, represented the amounts in respect of income tax and unemployment insurance premiums withheld from the employees’ remuneration that were not remitted to the Receiver General of Canada by the corporation Les Sols Taillefer Ltée, "the corporation Taillefer", in its capacity as employer in respect of the months of June, July, August and November 1987.

Facts

The two appellants testified on their own behalf.

The appellant Roméo Taillefer operated a black earth sales business from the early 1960s until 1976. Prior to that date, he had no employees in his service and had attended to the transportation and sale of this type of earth alone. In 1976, the business corporation Les Sols Taillefer Ltée was formed, whereas Marc Taillefer, son of the appellant Roméo Taillefer and brother of the appellant Denis Taillefer, joined it shortly thereafter. Marc Taillefer, who held a university degree in administration, began attending full time to the administration of the corporation. He played an important role during the first year of the corporation’s operation.

The business originally operated exclusively in the landscaping field. Subsequently, it gradually grew and, during the 1980s, became a larger and more diversified business. It carried out contracts in the construction field as well as in public works, such as contracts for the installation of water supply and sewer systems and bridge repairs. The corporation acted as a subcontractor as well as a general contractor.

The appellant Roméo Taillefer only has a grade six education. He was a member of the corporation Taillefer’s board of directors from the time the corporation was formed. He was also an employee. It appears from the evidence, however, that he did not take part in making the major decisions. He did not have an office on the corporation’s premises. He performed certain duties in the corporation’s garage, did repair work to the machinery, sometimes went to the sites and ran errands.

The appellant Denis Taillefer, the appellant Roméo Taillefer’s son, was also in the service of the family business. From 1976 to 1981, he was a director of the corporation and also occasionally handled certain jobs for the corporation Taillefer, while working full time as a consulting engineer for Gendron Lefebvre et Associés in Laval. In 1981, he joined the corporation Taillefer as a full-time employee. He attended to the work on the sites as well as project management. The two appellants Roméo Taillefer and Denis Taillefer as well as Marc Taillefer were the corporation Taillefer’s only shareholders from the corporation’s incorporation.

The appellant Denis Taillefer explained that, in the case of public works construction contracts, the corporation first had to obtain bid bonds and, after contracts were awarded, usually had to provide performance bonds and labour and material payment bonds each bearing on 50 per cent of the contract price. The system respecting deductions made from each progress payment was also explained in the case of works construction contracts.

On February 18, 1987, a notarial agreement was issued for the sale of shares by Marc Taillefer to 2439-5626 Québec Inc., represented by its president Mr. Bercusson. The sale concerned 32 common shares, representing 10 per cent of the corporation Taillefer’s capital stock. Mr. Bercusson also had the option to purchase another block of shares from the appellants Roméo Taillefer and Denis Taillefer. Shortly after the purchase of the shares, Marc Taillefer was replaced by David Bercusson. He continued Marc Taillefer’s activities until May 1987, when he left the corporation Taillefer without giving any notice. He had allegedly suffered from "burnout", it was learned much later. It was not until about mid-August 1987 that Mr. Bercusson was replaced as controller by Michel Lavigne following numerous approaches by the appellant Denis Taillefer. From May to August 1987, the appellant Denis Taillefer temporarily took over Mr. Bercusson’s duties in addition to performing his usual tasks.

The evidence established that, around 1985, the corporation Taillefer equipped itself with a computerized system that included the processing of pay information, in particular the calculation of source deductions and the printing of pay cheques. In the days after he took up his duties, Mr. Lavigne realized that the data gathered by the information system was not up to date. He then did what was necessary to complete those data. He also prepared an organization chart describing the various positions and indicating their incumbents. Mr. Lavigne saw that an employee who had previously conducted certain accounting transactions was replaced by Joanne Ordines. The difficult administrative situation that the corporation Taillefer had experienced after Mr. Bercusson’s unexpected departure thus stabilized with Mr. Lavigne’s arrival.

In 1987, the appellant Denis Taillefer usually signed the employees’ pay cheques as well as the cheques relating to the source deductions intended for the two governments. The appellant Roméo Taillefer also signed the cheques from time to time. The appellant Denis Taillefer explained that the payments for the months of June, July and August were not made to the Government of Canada since the corporation did not have the required funds. The 50 to 60 employees, seven or eight of whom were office employees, nevertheless all received their pay cheques during the period in issue apart from the appellants Roméo Taillefer, Denis Taillefer and certain other members of the Taillefer family.

The appellant Denis Taillefer also provided information on the financial arrangements the corporation Taillefer had made in order to finance the contracts for services. A $500,000 line of credit had been established for customer accounts payable within 90 days. This line of credit was used to the maximum during the relevant period.

The evidence revealed that the corporation Taillefer undertook major work in 1987. It had begun the construction of a 24-apartment building that was to be completed on July 1, 1987. A bid for that building was made on February 26, 1987. The purchase price was $1,140,000.00. The terms of payment provided for a $30,000 deposit upon acceptance of the bid, payment of the sum of $95,000 at the signing of the deed of sale, assumption of the existing hypothec amounting to $865,000 and payment of the balance of the selling price of $150,000 in three instalments over a three- year period. Construction of this building began in the winter of 1987. The application for the hypothecary loan of $750,000 was filed with CIBC Mortgage Corporation on April 23, 1987. The latter moreover advanced only $500,000 to the corporation Taillefer. The estimated total cost of construction of the building ranged between $800,000 and $850,000. In June 1987, the purchaser refused to take possession of the building, construction of which was to be completed around June 1, 1987. Steps were then taken to convert the building into condominium apartments. Consultations were held for this purpose with architects and plans were approved. Authorization to convert the building into condominium apartments was granted by government authorities around the end of 1987. The corporation Taillefer expended considerable effort to restructure the new financing. Consultations for this purpose, which proved fruitless, were conducted with a certain number of financial institutions such as the caisses populaires, the National Bank of Canada and the Canadian Imperial Bank of Commerce, etc. In the fall of 1987, mandates were given to real estate brokers to sell the condominium apartments in a single transaction or otherwise.

During that same year, 1987, the corporation Taillefer was party to other contracts relating to construction work. In most cases, the corporation was paid late by its customers because of the numerous extra jobs added to those provided under the initial contract. The corporation Taillefer performed work as a subcontractor for Bérou Construction Inc. The total amount unpaid by the latter firm was about $400,000 to $500,000 for work performed from May to September 1987. Work in addition to that originally provided by the corporation Taillefer was also carried out around September 1987 by the corporation Taillefer on Jacques Cartier and Champlain bridges in respect of which contracts the sum of $111,000 was payable. Other work was completed by the corporation Taillefer on the St-Vincent-de-Paul penitentiary. A total sum of $226,746 was owed to the corporation on December 22, 1987, whereas part of that amount had already been payable in November 1987.

The explanations given by Mr. Lavigne concerning the origin of the corporation Taillefer’s financial problems must be noted. He stated the following:

..the problem of working capital, I was able to see, was that there was this matter of what was discussed a moment ago, that building, the contract for construction of an apartment building. And there were also delays in collecting on major contract accounts, such as the contract with Bérou for work that was done in the town of Mont- Laurier. There was also the matter of collection on the Beaver account, to name only a few. As a result of all that, there was, there was, if you will, a major working capital problem in the business.

[Translation.]

Mr. Lavigne undeniably took considerable steps to obtain the financing required in particular for the apartment building. He also tackled the collection of accounts receivable. Realizing that payments in respect of source deductions had not been made, he was able to make the necessary arrangements to make payment in respect of source deductions to the Government of Canada for September and October 1987. This witness also stated that the corporation also took measures to be able to pay the amounts deducted at source. With respect to the priority to be given to creditors, however, he admitted that the Government of Canada had been considered as on the same footing as a supplier. He even indicated that, during the relevant period, the corporation Taillefer had made certain payments to suppliers rather than to the Government of Canada so that the corporation Taillefer could continue its activities. It should also be added that the corporation Taillefer filed a proposal under the Bankruptcy Act on December 17, 1987. That proposal was rejected by the creditors on January 29, 1988. The corporation’s bankruptcy was therefore retroactive to December 17, 1987.

It appears from the evidence that, prior to June 1987, the corporation had on numerous occasions made late payments to Revenue Canada in respect of amounts deducted at source. This was the case in particular for November 1985 and January, February, March and April 1986. As we know, remittances of deductions at source must be forwarded to Revenue Canada for each month by the fifteenth of the following month at the latest. Despite these delays and the costly penalties arising therefrom and in spite of the seizure of the corporation Taillefer’s bank account by Revenue Canada on April 16, 1986, it managed to discharge in full its obligations toward Revenue Canada for the 1986 taxation year.

I now come to two events that occurred in 1987 respecting the nonpayment of amounts withheld for the months of June, July, August and November of that same year.

Around the end of August or the start of September 1987, the corporation Taillefer received a visit from the Revenue Canada payroll auditor. The matter concerned source deductions that had not been paid for the months of June and July 1987. Claude Bélanger, of Revenue Canada’s collections service at that time, was assigned in early September 1987 to collect the amounts owed on this account by the corporation Taillefer.

On September 14, 1987, he contacted Mr. Lavigne, then the corporation Taillefer’s new controller, and informed him of the corporation’s poor history with respect to remittances of source deductions. On September 15, 1987, Mr. Bélanger communicated with the appellant Denis Taillefer and referred to his liability arising from section 227.1 and subsection 238(2) of the Act. On September 16, he spoke with a manager of the corporation Taillefer who informed him that the corporation Taillefer hoped to obtain $800,000, which would enable it to discharge its liability toward Revenue Canada. Following the failure of efforts to obtain that financing, the appellant Denis Taillefer and Mr. Lavigne met Mr. Bélanger and his supervisor on September 29. The latter required a payment within 30 days. On October 2, 1987, Mr. Lavigne filed a proposal respecting the payment of arrears at a meeting with Mr. Bélanger. The latter rejected the proposal and a counter-proposal was made in a letter dated October 7, 1987. On this point, mention was made, to Mr. Bélanger, of the claims that the corporation Taillefer had against the Government of Canada with respect to the Excise Tax and on the subject of public works contracts. According to Denis Taillefer, those sums amounted to $35,000 at that time. In the meantime, payments were made for the months of September and October 1987.

During that period, sums were paid to the corporation Taillefer’s suppliers, while the corporation did not pay amounts deducted at source to the Receiver General, as witnessed by the following excerpts from their cross- examination of the appellant Denis Taillefer and of Mr. Lavigne:

The appellant Denis Taillefer

Q. During the period starting in June, were there any suppliers who were paid when the source deductions were not paid?

A. As I told you, there were certainly suppliers who were paid in order to obtain a discharge from them, in order to obtain the cheque which was owed to the company.

Mr. Lavigne

Q. And during that period, were there payments made to suppliers, other suppliers, apart from the government?

A. There were payments that were made to suppliers because, if you want, if you want to complete work so that a cheque is payable by the customer, municipality X or Y, and then that supplier obtains measures with respect to that customer, telling it: "Well, look, Sols Taillefer owes us so much," and then they demand that it be done, well, we turn around and, if we have a little bit of money, that’s the one we pay.

[Translation.]

On November 13, 1987, another meeting was held between the appellant Denis Taillefer and Revenue Canada officials. The latter then gave the corporation Taillefer until November 27 to pay its arrears. However, around the end of November, the Bank of Montreal imposed a firm of outside auditors on the corporation Taillefer’s office. Starting on November 26, the cheques written to suppliers were no longer accepted or honoured by that bank. On December 2, 1987, the Department of Revenue Quebec proceeded with the seizure of the corporation Taillefer’s bank account. Furthermore, Revenue Quebec proceeded at the same time with the registration of a legal hypothec on the condominium building.

Following the November 13 meeting between the appellant Denis Taillefer and Mr. Bélanger of Revenue Canada, the respondent received a cheque dated November 27, 1987 for $40,000 representing the amount owed by the corporation Taillefer at that time. Because of the freeze on the corporation’s account by the Bank of Montreal on November 26, 1987, and the seizure of the account by Revenue Quebec on December 2, that cheque could not be cashed. Similarly, the cheque issued on December 15, 1987 for the corporation’s November source deductions could not be honoured.

During December 1987 and January 1988, the corporation Taillefer’s accounts receivable amounting to $400,000 were paid. It became very difficult for the corporation to collect its debts. Considering the corporation’s lack of cash, privileges were registered on the municipalities’ property by the suppliers and the cheques were eventually issued jointly to the Bank of Montreal, the bonding company Alta and the corporation Taillefer. The corporation Taillefer was unable to receive any part of that amount.

The evidence also showed that the appellants Roméo Taillefer and Denis Taillefer advanced the corporation Taillefer a total sum of about $30,000 from their personal savings to pay the corporation’s employees. The corporation Taillefer also benefitted from the non-payment of the sum of $21,000 that a related corporation by the name of Taillefer & Associés Incorporée could have required in respect of rent for the use of their premises by the corporation Taillefer during 1987. Furthermore, the two appellants decided not to cash their pay cheques during a period of three to four months in 1987. Other members of the Taillefer family working for the firm did the same. The total amounts of the uncashed pay cheques amounted to $46,441.73 according to Mr. Lavigne. It must also be stated that, during 1987, the appellants received none of the advances they had granted to the corporation Taillefer.

It was further adduced in evidence that the T-4 slips respecting the employees’ remuneration for 1987 did not originally take into account the fact that certain cheques respecting wages payable to the appellants and to certain other members of the family were not cashed. On March 11, 1988, Mr. Lavigne prepared a document entitled "T-4 and TP-4 Corrections, 1987" to enable the corporation Taillefer’s employees to complete their income tax returns more easily. Shortly afterward, that is on April 28, 1988, a Revenue Canada auditor visited the corporation Taillefer and admitted that wages had not been cashed by certain employees of that corporation. According to the evidence, including the testimony of Joanne Arsenault, the amount of $74,641.63 of each of the assessments in appeal does not include the uncashed pay cheques issued prior to December 1, 1987.

ANALYSIS

The liability of the directors of a corporation in the case of failure to make payments of amounts deducted at source pursuant to the Income Tax Act is established by subsection 227.1(1) of the Act. That subsection read as follows:

227.1(1) Where a corporation has failed to deduct or withhold an amount as required by subsection 135(3) 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 liable, together with the corporation, to pay that amount and any interest or penalties relating thereto.

Subsection 227.1(3) of the Act enables a director to hold himself harmless from liability in certain circumstances. It provides as follows:

227.1(3) A director is not liable for a failure under subsection (1) where he exercised the degree of care, diligence and skill to prevent the failure that a reasonable prudent person would have exercised in comparable circumstances.

Having regard to the circumstances, I must determine whether the appellants acted with the degree of care, diligence and skill required by subsection 227.1(3) of the Income Tax Act to prevent the non-payment of the sums deducted at source in respect of the months of June, July, August and November 1987.

I shall first consider the situation of the appellant Roméo Taillefer.

Liability of the Appellant Roméo Taillefer

It was argued on behalf of the appellant Roméo Taillefer that the latter had never had the authority to act or to make decisions for the corporation Taillefer. Counsel for the appellants contended that this appellant must be exempted under subsection 227.1(3) of the Act from all liability since a reasonably prudent person would have acted in the same manner in those circumstances. He based his claims in particular on Fitzgerald v. Minister of National Revenue, [1991] 2. C.T.C. 2595, 92 D.T.C. 1019 (T.C.C.) at page 2596 (D.T.C. 1020). and Pidskalny v. Minister of National Revenue, [1991] 2 C.T.C. 2192, 91 D.T.C. 1046 (T.C.C.) at page 2197 (D.T.C. 1049).

Fitzgerald seems to me the more relevant in this case. The facts of that case are similar to those in issue, with the difference that the father was the only person in the family business EF Ltd. to make the decisions. His three sons and his wife, although all members of the board of directors, took part in no meeting and were not even aware of the corporation’s financial situation. The Minister of National Revenue had assessed the appellants under subsection 227.1(1) of the Act in respect of the amounts deducted but not paid to the Receiver General by EF Ltd. before it closed in 1986. Judge Mogan of this Court stated the following at page 2596 (D.T.C. 1020-21):

they were told that they were directors of the company but there were never any meetings of any kind. The father owned all the shares. They were never shown any of the company’s books, records or financial statements. None of the appellants had signing authority on behalf of the company.

The appellants had nothing to do with the management of the company and the three brothers were involved only as employees.

there were no meetings of any kind; the father kept all the financial information to himself; the father purchased all the supplies and each Friday he would collect the receivables. None of the sons had anything to do with the paper work or administration of the business and they had no idea as to whether it was profitable even though they were all mature adults at the time of the fire.

It appears to me that the appellants were directors in law (i.e., their names appear in the company’s minute book as directors) but they were not in fact directors. They never met as directors. They never acted alone or in concert as directors. They had no knowledge of the management or administration of the company’s business. They had no equity in the company. They had no way of compelling the fifth director (Eugene Fitzgerald, the sole shareholder) to disclose any information concerning the company’s financial affairs. They were directors in law only because of their family connection to Eugene Fitzgerald.

Judge Mogan then gave his interpretation of subsection 227.1(1):

The passive or inactive director is not, per se, free from liability under subsection 227.1(1). But when the passive or inactive director has become a director in the context of a family business operated by a corporation which is dominated by an uncompromising patriarch, the domestic responsibility for maintaining harmony within the family becomes interwoven with the legal responsibility to third parties and, in these circumstances, I think that it is not reasonable to impose the same standard of care, diligence and skill on the passive "family director" as on the person who is truly free to become a director and does so outside a family context.

Lastly, he concludes by applying these principles to the facts, as follows:

...the appellants satisfy the test in subsection 227.1(3) because they exercised the degree of care, diligence and skill that a reasonably prudent person would have exercised in comparable circumstances. I emphasize "in comparable circumstances" because a reasonably prudent person would, in this feudal family, maintain family harmony by serving as a director in name only and by leaving the management of the business in the hands of the strong-minded patriarch who had managed it successfully for 30 years.

Similarly, in Pidskalny, Judge Kempo allowed the appeal of a taxpayer who argued that he was not liable as a director since he had acted reasonably in the circumstances. She commented as follows at page 1049:

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.

In the case of the appellant Roméo Taillefer, the evidence shows undeniably that he was not involved in the administration of the corporation Taillefer. His level of education was entirely modest and, what is more significant, he played no role in the making of important decisions. As his counsel said, "At the relevant time, he held only an honorary title in the corporation". He owed his presence on the board of directors to the family nature of the corporation. His role as a director was only nominal. He in fact performed manual labour on the sites and at the garage. It is not surprising that Mr. Bélanger, who handled the case for the respondent, stated that he had never spoken to the appellant Roméo Taillefer.

It is also useful to bear in mind the comments of Addy J. in Robitaille v. R. (sub nom. Robitaille v. The Queen), [1990] 1 C.T.C. 121, 90 D.T.C. 6059 (F.C.T.D.), where he states that the circumstances must be taken into account in evaluating the standard of conduct relevant to the directors of corporations established by section 227.1 of the Act. He makes the following comments at page 126 (D.T.C. 6063):

The term "diligence", which is now codified, provides a higher objective standard than that imposed by the common law on directors generally. Although the test is to a large extent an objective one, the question remains, however, what a reasonably prudent person would do in the circumstances in which a director finds himself. These circumstances include subjective elements such as, degree of education, business knowledge and general ability of the director.

[Emphasis added.]

Having regard to the circumstances described above, I conclude that the appellant Roméo Taillefer was not liable under subsection 227.1(1) given that he had acted with the diligence required by subsection 227.1(3). Fitzgerald confirms that it is not unusual in the context of a family business for certain members of the family to have the title of member of the board of directors without taking part in fact in the administration of the business. This was the case of the appellant Roméo Taillefer.

Liability of the Appellant Denis Taillefer

It was not disputed that the appellant Denis Taillefer had the general management of the corporation Taillefer’s business during the relevant periods. It was claimed on behalf of the appellant Denis Taillefer that he had conducted himself in accordance with the standard established at subsection 227.1(3) of the Act and that he thus could not be held liable under section 227.1 of the Act.

It appears to me that the appellant Denis Taillefer could have given greater priority to the payment by the corporation Taillefer of the amounts deducted at source. Despite very difficult circumstances, the corporation nevertheless managed to pay wages to all the corporation’s employees with the exception of those of the two appellants and some members of the corporation Taillefer family. It is true that the appellants forewent cashing their pay cheques and that they advanced personal funds in order to maintain a certain level of the corporation’s activities. It was adduced in evidence, however, that suppliers were paid during those months, when there were supposedly no funds to enable the corporation Taillefer to pay the Receiver General the amounts deducted at source. In other words, during the months of June, July and August 1987, the corporation Taillefer used the funds owed to Revenue Canada to continue the operation of its business. This was unacceptable conduct. The corporation Taillefer also acted in this manner on one occasion in 1985, then again in 1986, when, from January to April, it remitted the source deductions late. However, it later discharged its debt as well as the accumulated penalties and interest as a result of those delays. This practice consisting in financing the operations of a business with the aid of source deductions does not appear to me consistent with the standard prescribed at subsection 227.1(3). On this point, I agree with the substance of the remarks of counsel for the respondent, when he said:

I do not think that Parliament for a single instant wanted to put source deductions on the same footing as the debts of the business; it was the latter that chose to do so, whereas the source deductions constituted money that belonged to the employees.

[Translation.]

Despite the serious administrative problems that the corporation Taillefer experienced at the time, the appellant Denis Taillefer did not prove that he had shown the necessary diligence to ensure that the corporation Taillefer paid within the prescribed time the amounts withheld by it from its employees’ remuneration. He was thus personally liable in his capacity as a director of the corporation Taillefer.

Mr. Lavigne’s arrival as the corporation’s controller in mid-August 1987 helped improve the situation. The matter of the payment of the amounts deducted at source appears to have been a greater concern to the corporation Taillefer’s management. In addition, pressure exercised by the Revenue Canada officials in September and October 1987 led the corporation Taillefer, and consequently the appellant, to pay more attention to the payment of those amounts. Furthermore, the failure to pay the amounts withheld in respect of November 1987 falls within an entirely factual context. The Bank’s decision on November 26, 1987 to no longer honour any cheque as well as the seizure of the corporation’s account by the Department of Revenue Quebec prevented the corporation from paying the amounts payable in respect of November 1987. Starting on November 26, 1987, it became impossible for the corporation to issue a cheque that would not be rejected at cashing. The Bank of Montreal controlled the transactions of the corporation’s bank account at that time. Consequently, the appellant Denis Taillefer cannot be held liable for the non-payment of the sums deducted at source by the corporation Taillefer in respect of November 1987, which were not payable until December 15 following.

The decision in Fancy v. Minister of National Revenue, [1988] 2 C.T.C. 2256, 88 D.T.C. 1641 (T.C.C.), relies on this conclusion. In that case, the appellants were exempted under subsection 227.1(3) since, when they had financial difficulties, the bank concerned suddenly decided not to pay Revenue Canada. The bank chose the cheques it honoured. As Chief Judge Couture of this Court stated in that case, at page 2260 (D.T.C. 1643):

The bank was in a position to dominate the finances of the company and to dictate its fate. Its main concern is to recoup its money. This was the situation of the company since 1970 and at the beginning of August 1982. The bank was in control of the movement of its funds.

It is therefore my view that the appellant Denis Taillefer was liable for the failure by the corporation Taillefer to remit to the Receiver General the amounts deducted at source for the months of June, July and August 1987. He must not be held liable in respect of the amounts deducted at source for November 1987.

For these reasons, the appeal of the appellant Roméo Taillefer is allowed, with costs, and the assessment respecting him dated April 21, 1989 is vacated.

As to the appeal of the appellant Denis Taillefer, it is allowed in view of my conclusion that he was not liable in respect of the amounts deducted for November 1987 and also to take into account certain adjustments. The assessment is therefore referred back to the Minister of National Revenue for reconsideration and reassessment on the following basis:

(a) the amounts deducted from the remuneration effectively paid in November 1987 to the employees of the corporation Taillefer but not remitted to the Receiver General must be taken off from the assessment;

(b) the amounts deducted from the remuneration paid to the employees during the months of June, July and August 1987 to the extent only that the cheques relating to this remuneration were not cashed must be taken off from the assessment.

The assessment concerning the appellant Denis Taillefer is confirmed in all other respects.

As the respondent succeeded to a large degree in the appeal of the appellant Denis Taillefer, costs are awarded to the respondent.

In computing the costs payable to the appellant Roméo Taillefer and the respondent, the appellant Roméo Taillefer and the respondent will each be entitled only to half of the costs relating to the hearing of these two appeals heard on common evidence.

Appeals allowed in part.