741290 Ontario Inc. v. Canada, 2012 DTC 5025 [at 6665], 2011 FCA 361, aff'g 2011 DTC 1089 [at 489], 2011 TCC 91

Date: 20111220

Docket: A-131-11

Citation: 2011 FCA 361

CORAM:       NOËL J.A.

                        DAWSON J.A.

                        TRUDEL J.A.

BETWEEN:

741290 ONTARIO INC.

Appellant

and

HER MAJESTY THE QUEEN

Respondent

Heard at Toronto, Ontario, on December 15, 2011.

Judgment delivered at Ottawa, Ontario, on December 20, 2011.

REASONS FOR JUDGMENT BY:                                                                                   NOËL J.A.

CONCURRED IN BY:                                                                                               DAWSON J.A.

TRUDEL J.A.

Date: 20111220

Docket: A-131-11

Citation: 2011 FCA 361

CORAM:       NOËL J.A.

                        DAWSON J.A.

                        TRUDEL J.A.

BETWEEN:

741290 ONTARIO INC.

Appellant

and

HER MAJESTY THE QUEEN

Respondent

REASONS FOR JUDGMENT

NOËL J.A.

[1]               This is an appeal from a decision of Bowie J. of the Tax Court of Canada (the Tax Court judge) upholding the assessment of penalties issued pursuant to subsection 227(9) of the Income Tax Act, R.S.C. 1985, c. 1 (5^th Supp.) (the Act) for failure by the appellant to remit source deductions withheld from the salaries paid to its employees as and when required to do so.

[2]               The issue in this appeal is whether the penalties assessed are subject to the due diligence defence which was successfully advanced by the appellant’s directors against assessments issued pursuant to subsection 227.1(3) of the Act.

[3]               Like the Tax Court judge, I am prepared to assume for present purposes that a defence may be validly advanced against a failure to remit where the failure is caused by events beyond the employer’s control. However, such a failure cannot possibly be justified by a decision by the employer to appropriate for its own use source deductions in order to keep the businesses afloat in difficult times as was done here (reasons, paras. 21 and 22). In choosing to act as it did, the appellant ignored the unconditional duty imposed on it by subsection 153(1) and is, as such, liable to the assessed penalties.

[4]               This duty being distinct and separate from that imposed on corporate directors pursuant to section 227.1, no issue estoppel or abuse of process can result from the fact that the directors in this case were found to have made reasonable attempts to prevent the failure.

[5]               I would dismiss the appeal with costs.

“Marc Noël”

“I agree.

           Eleanor R. Dawson J.A.”

“I agree.

          Johanne Trudel J.A.”

FEDERAL COURT OF APPEAL

NAMES OF COUNSEL AND SOLICITORS OF RECORD

DOCKET:                                                                              A-131-11

APPEAL FROM A JUDGMENT OF THE HONOURABLE MR. JUSTICE BOWIE OF THE TAX COURT OF CANADA DATED MARCH 3, 2011, DOCKET NO. 2007-3055(IT)G.

STYLE OF CAUSE:                                                              741290 ONTARIO INC. and HER MAJESTY THE QUEEN

PLACE OF HEARING:                                                        Toronto, Ontario

DATE OF HEARING:                                                          December 15, 2011

REASONS FOR JUDGMENT BY:                                     Noël J.A.

CONCURRED IN BY:                                                         Dawson J.A.

                                                                                                Trudel J.A.

DATED:                                                                                 December 20, 2011

APPEARANCES:

SOLICITORS OF RECORD: