Gagné Estate v. Canada, 2023 FCA 9

The deceased (Gagné) was assessed on May 22, 2013 under ETA s. 323 respecting unremitted net tax of a corporation that was majority-owned by him and in respect of which he had been recorded in the registry under the Act respecting the Legal Publicity of Enterprises (Quebec) (the “ALPE”) as being the director from June 26, 2006 to February 9, 2012. Gagné objected on the basis inter alia that he had ceased being a director for more than two years before such reassessment, and a few days before the trial of the appeal of his estate (following his death) from such reassessment, its notice of appeal was amended to allege inter alia that Gagné had never been a director (given that the proper corporate procedures had not been followed for his appointment, including his consenting to such appointment. and there being an absence of any resolution appointing him) – an argument that Gagné.

Before dismissing the estate’s appeal, LeBlanc JA noted that Art. 338 of the Civil Code of Quebec provided that “No one may be designated as a director without his express consent,” which contrasted with, for example, s. 119(9) of the OBCA, which required such consent to be in writing, and noted that s. 62 of the ALPE provided:

The information relating to each registrant is proof of its contents in favour of third persons in good faith from the date on which it is entered in the statement of information. Third persons may submit any proof to refute the information contained in a declaration … .

and noted that the ARQ had been entitled to rely on the rebuttable presumption arising under s. 62. He also indicated (at paras. 44-45, TaxInterpretations translation) that the absence of a resolution appointing Gagné should be given little weight given the absence of corporate records since 2005, stated (at para. 48) that “[i]n other contexts, the defence of corporate formalism is of equally little value when it comes up against the totality of the facts of the case” and further stated (at para. 49):

In the context of this case, the problem is that the Estate is seeking to exploit a governance defect that the principal never even raised when, on more than one occasion, he had ample opportunity to do so.

The deceased (Gagné) was assessed less than two years after the registry under the Act respecting the Legal Publicity of Enterprises (Quebec) (the “ALPE”) showed him as ceasing to be the director of his majority-owned corporation. A few days before the hearing of the appeal by his estate, its notice of appeal was amended to allege inter alia that Gagné had never been a director (given that the proper corporate procedures had not been followed for his appointment, including his consenting to such appointment. and there being an absence of any resolution appointing him) – an argument never made by Gagné.

Before dismissing the estate’s appeal, LeBlanc JA noted the rebuttable presumption under s. 62 of the ALPE as to the accuracy of the registry, and that the absence of a resolution appointing Gagné should be given little weight given the absence of corporate records since before his mooted appointment as director. He further stated (at para. 49, TaxInterpretations translation):

In the context of this case, the problem is that the Estate is seeking to exploit a governance defect that the principal never even raised when, on more than one occasion, he had ample opportunity to do so.