Leung v. MNR, 91 DTC 1020, [1991] 2 CTC 2268 (TCC), rev'd 93 DTC 5467 (FCTD)

Rip, T.CJ.:—This is an appeal from an assessment of tax made pursuant to subsection 227(10) of the Income Tax Act, R.S.C. 1952, c. 148 (am. S.C. 1970-71-72, c. 63) (the "Act") for an amount payable by Joseph Leung, the appellant, under section 227.1 of the Act on the basis he was a director of a corporation at the time it failed to remit to the Receiver General of Canada amounts of salary and wages withheld from employees for income tax.

At the time of trial the appellant Leung was a resident of Hong Kong. However, he resided in Canada from 1974 to 1990. During this time he attended the University of Toronto where he graduated with a Bachelor of Arts degree in 1978. While at university he worked part-time and summers as a bookkeeper. He performed similar services between 1978 and 1980. Later he worked four years for a firm of chartered accountants.

From October 1983 to the end of 1984, Leung worked for 482262 Ontario Ltd. (“Ontario”) which carried on business as "The Business Centre". Leung owned 60 per cent of the shares of Ontario; a friend, Sake Chant, and the appellant's brother, Tony Leung, owned the balance of the shares. Ontario carried on the business of looking for Canadian investments for clients residing in the Orient, in particular, Hong Kong.

On one or two occasions Ontario provided bridge financing for its clients. In February 1984 Ontario advanced $125,000 to Eastern Scale Manufacturing Inc. ("Eastern"), a company in which two of Ontario's clients planned to invest, on security of a promissory note. The loan was made on February 27, 1984 and payment was due on June 1, 1984. Eastern carried on the business of manufacturing road scales and electronic scales for industry and had carried on business since the early 19005. Eastern's manufacturing plant was located in Toronto.

The loan agreement between Ontario and Eastern provided that if Ontario's clients did not invest in Eastern prior to June 1, 1984, Ontario had the right to convert the debt to equity and receive special shares in Eastern equal to 17 /2 per cent of the equity and voting rights in Eastern. Eastern also agreed that if the clients invested in the corporation, Ontario would be granted 14 per cent of the voting shares of Eastern. The clients invested in Eastern, Eastern repaid the loan to Ontario, and Ontario received 14 per cent of the voting shares of Eastern.

The shareholders of Eastern entered into a shareholders’ agreement, dated May 11, 1984, which provided that Eastern have five directors, of which one was to oe appointed by Ontario. Ontario appointed the appellant. The other directors were appointed as follows: two directors by Tom Sloss, the majority shareholder of Eastern, and two directors by Connestoga Bridge Capital Corporation, the shares of which were owned lg! Ontario's clients, David Penn and Wai-Leung Yuen. In fact Leung, Penn and Sakae Cheng had been elected directors of Eastern on February 28, 1984.

Sloss was, and was to continue to be, the president of Eastern. Penn was to be appointed vice-president in charge of marketing and Yeun, vice-president in charge of marketing in the Pacific Rim. The appellant was to be elected treasurer. A Mr. Edward Yeun was to be, but was not, elected secretary; the office of secretary was left vacant.

The agreement also provided:

4.03 The Board of Directors shall meet at the expense of the Corporation no less than once a month, for management meetings wherein the Corporation shall have prepared and shall present financial reports concerning the Corporation's previous month's business activity and financial status with comparative figures for the same time period during the previous fiscal year.

4.05 Notice of a Board of Directors meeting shall require ten days from the date of mailing to be effective.

It was contemplated, said Leung, that Penn and Yeun would play an active role in Eastern. Penn was an engineer and intended to immigrate to Canada. Leung said Yeun had "connections" in China, had tried to sell for Eastern but was not successful.

However, Leung testified, nobody contemplated he would be actively involved in Eastern or attend its offices on a day-to-day basis. One of Leung's responsibilities as treasurer of Eastern was to sign cheques. Under the shareholders' agreement all Eastern cheques were to be signed "by any two of the President, the Secretary, the Treasurer or the Vice President in charge of marketing, or the Vice President in charge of marketing in the Pacific rim, together with the Controller” of Eastern. Leung testified Penn and Yuen were out of the country and therefore the three people capable of signing cheques were Sloss, the president, himself as treasurer and the controller.

John Henswell, the controller of Eastern, would invite Leung to Eastern's offices each week to review invoices and sign cheques; Leung would spend about two hours a week at Eastern. If Sloss was available, “he’d show me around”. Eastern was to pay, but did not pay, Ontario a monthly fee of $300 for the time spent by Leung at Eastern.

The appellant recalled he first began signing cheques for Eastern in May 1984 and continued to do so until early November 1984, after Henswell had been fired. Henswell was fired in October because, according to Leung, Sloss said he wanted to reduce costs. Once Henswell left Eastern nobody called the appellant to sign cheques. Sloss, Leung stated, did not mention he was going to hire some other person to replace Henswell as controller and Leung found out about the engagement of a new controller after the fact. Leung never met Henswell's replacement.

When Leung attended at Eastern's offices he would frequently be shown trial balances and monthly income and balance sheets. He said he would test the validity of the invoices before signing the cheques but he did not verify all the invoices. He did not review bank statements because "he didn't give it to me". By "he" I assume Leung meant Henswell, who would have assembled the material for him. Sometimes, Leung said, he would review the payroll. He signed the cheques to the Receiver General for source deductions on a monthly basis; in fact, when Leung first signed cheques in May 1984 Henswell informed him the Receiver General "must be paid".

Leung telephoned Sloss the last time he visited Eastern and since Sloss was not available, left a message. When Sloss returned the call, Leung was out. They continued to exchange calls, but kept on missing each other. Leung never did get in touch with Sloss after early November. He does not know who signed cheques in his place. He said he cabled Yuen and Penn in Hong Kong to advise them he was no longer being called to sign cheques. They asked him, he testified, to keep trying to get hold of Sloss. He also informed Yeun and Penn's lawyer in Toronto, who was his lawyer as well, that he was not signing cheques. According to Leung, the lawyer, Mr. Cecil Rotenberg, wrote Sloss a letter complaining Leung was no longer signing cheques. Sloss did not reply and Leung, who was preoccupied with starting a new business at the time, November and December 1984, did nothing further.

Leung claimed he had a very close relationship with Rotenberg who had authority to do what was "best for me to protect my interests even on his own initiative without specific instructions . . .”. He had complete confidence in Rotenberg and expected Rotenberg to take action on his behalf with respect to Eastern without advising him.

The only document the appellant produced with respect to Rotenberg was a memorandum of November 13, 1984 ne sent to the lawyer advising that he and his partner in Ontario were withdrawing immediately their involvement in the business carried on by the corporation but that he would stay “behind to clean up the loose end [sic] of all the transactions which I hope can be accomplish [sic] by the end of this month". The decision on the future of the business, he advised Rotenberg, "is entirely up to you. . .”.

There is nothing in the memorandum concerning Eastern.

Leung revealed that he was aware before Ontario advanced money that Eastern was in financial difficulty due to negative cash flow; Eastern had been operating at a loss and was in desperate need of capital. This was the reason for the investment. As at October 31, 1983 the company had a deficit of $159,369. As at March 1984 the deficit was $156,060. During the 11-month period ending March 31, 1984 Eastern lost $196,214.

Leung testified that once the money was invested in Eastern there was no cash flow problem and during the first few months after the investment was made, Eastern made a small profit. In October 1984 Eastern again experienced cash flow problems.

An official of the respondent advised Leung in a letter dated January 29, 1986 of Eastern's failure to remit source deductions and that he, as director, was potentially liable for the unpaid deductions. The letter was received by Rotenberg's office and was forwarded to Leung together with the information Eastern was in receivership.

In replies to questions on cross-examination Leung acknowledged he never made inquiries to verify if Eastern had proper procedures in place to ensure payment of the source deductions. He never asked the controller what happened to the funds withheld between time of withholding and the date payment was to be made. Eastern's banker, the Continental Bank, had advanced $344,000 to Eastern and had placed restrictions on Eastern with respect to payment of salaries to managers. Leung was not aware if Eastern had to provide its banker with monthly operating statements. He did not know into what bank account, if any, the source deductions were deposited. He testified he was never aware Eastern did not remit the source deductions.

Leung stated that when he attended at Eastern he would sign many cheques at any one time but remembered signing cheques every month for the Receiver General. However the respondent's counsel informed him that Revenue Canada did not receive cheques every month and that in July 1984 an official of the respondent attended at Eastern. Leung was not aware of the official's visit.

Leung testified he “thinks he signed cheques for September, 1984 but not for October or November 1984". He admitted he never made inquiries to ensure cheques to the Receiver General would be sent on time after Eastern was late for a particular month. It would appear he saw his job as simply signing cheques for invoiced amounts but with no need to make any inquiries to determine the existence of other liabilities of Eastern.

Once Leung was no longer signing cheques for Eastern, he never verified at the bank if the cheques were being honoured. He never called,or attempted to call, a meeting of the directors of Eastern to resolve the problem. He stated his discussions with Rotenberg addressed his concern for the funds invested.

Diligence

Subsections 227.1(1) and (3) read as follows:

(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.

(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 reasonably prudent person would have exercised in comparable circumstances.

Appellant's counsel submitted his client exercised the degree of care, diligence and skill to prevent the failure by Eastern that a reasonably prudent person would have exercised in comparable circumstances.

There is no evidence before me that Leung did anything to prevent Eastern's failure to remit the amounts withheld to the Receiver General. In fact he did nothing. Leung's only concern when things went bad with Eastern was to try to ensure that the funds invested by Ontario's clients would not be lost. His testimony and the documentary evidence adduced at trial both indicate at no time did the question of the. remission of the withholding tax ever enter Leung's mind. Not even his lawyer was concerned with the failure of Eastern to remit and I assume this is because Leung never discussed that problem with him.

I am not convinced that Leung ever gave much concern to the remission of the withholding tax, even during the several months he believed Eastern was doing well. He had no idea that Eastern had failed to remit withholding tax before July 1984; he could not inform the Court with any certainty of any cheques he signed in favour of the Receiver General.

My appreciation of Leung's evidence is that he was given authority to sign cheques to ensure Eastern's funds were being spent for legitimate business purposes. However he never put his mind or any effort into trying to prevent Eastern from failing to remit withholding tax.

Validity of Assessment

The notice of assessment addressed to Leung, dated September 9, 1986, contains the following information:

COMPLETE AND MAIL THIS TOP PORTION WITH YOUR REMITTANCE. MAKE YOUR REMITTANCE PAYABLE TO THE RECEIVER GENERAL.

THIS NOTICE DOES NOT INCLUDE ANY BALANCE FROM A PREVIOUS ASSESSMENT.

		DETACH HERE
DATE			AMOUNT
			UNPAID
Sept 9, 1968	$50,536.07	$15,239.09	$65,775.16	AMOUNT
				UNPAID IS DUE
				AND HEREBY
				REQUESTED
NOTICE OF ASSESSMENT IN RESPECT OF:

Liability under subsection 227.1(1) of the Income Tax Act of Canada Section 36a of the Income Tax Act of Ontario, Section 22.1 of the Canada Pension Plan Act and section 68.1 of the Unemployment Insurance Act 1971 for $65,775.16 being the amount of unpaid deductions, penalties and interest payable by Eastern Scale Manufacturing Inc., in respect of Notices of Assessments dated June 17, 1985, July 8, 1985, September 11, 1985, September 19, 1985 and November 22, 1985.

H.G. ROGERS

NR67 DEPUTY MINISTER OF NATIONAL REVENUE FOR TAXATION REV.84

Diana Carol Gee, employed by the respondent as a collections officer at the Toronto District Office, had custody of Leung's file with respect to the preparation of the assessment. She testified that the notice of assessment was issued by a Ms. Somji, a supervisor in the Collections Section, on September 9, 1986. Ms. Somji calculated the tax on September 4.

Gee had carriage of Eastern's file as well. She said the Collections Section received Eastern's file on August 25, 1985 because of late remittances. The remittance for May 1984 was received on June 29, 1984, 14 days late; the July, October and November 1984 remittances were also late. The December 1984 payment was late and was not honoured by the bank; a replacement cheque was honoured. Eastern failed to remit payments on time for the early months of 1985 and upon requests by officials of the respondent, delivered three postdated cheques on April 2, 1985, dated May 1, June 1 and July 1, 1985; all the cheques were accepted by the bank. Subsequent payments were late, partial or not made at all. Eastern was assessed under the Act, Income Tax Act of Ontario, Unemployment Insurance Act and Canada Pension Plan on the several occasions described in the notice of assessment for the deductions at source, penalties and interest.

Once Eastern went into receivership, the respondent decided to issue assessments to the directors. Gee stated the practice of the respondent is that an assessment issued under subsection 227(10) is prepared under the direct supervision of the supervisor after receiving the concurrence to assess by the respondent's officials in Ottawa.

Gee testified that at no time did Leung or his representatives request details of the assessment either in writing or at meetings with officials of the respondent.

At the outset of trial, counsel for the appellant made a motion to the Court to allow the appeal on the grounds the respondent's purported assessment fails to constitute an assessment at law. After hearing submissions by both counsel, I advised I was not prepared to rule immediately. Evidence was then called. In closing argument the appellant's counsel also submitted that the assessment is not valid as it was not prepared by the Minister of National Revenue, Taxation.

The nature of an assessment was considered by Thorson, P. in Pure Spring Co. v. M.N.R., [1946] C.T.C. 169; 2 D.T.C. 844. Mr. Maclnnis, appellant's counsel, referred to page 198 (D.T.C. 857) of the reasons:

The assessment is different from the notice of assessment; the one is an operation, the other a piece of paper. The nature of the assessment operation was clearly stated by the Chief Justice of Australia, Isaac,, A.C.J., in Federal Comissioner of Taxation v. Clarke ((1927) 40 C.L.R. 246 at 277:

An assessment is only the ascertainment and fixation of liability.

a definition which he had previously elaborated in The King v. Deputy Federal Commissioner of Taxation (S.A.); ex parte Hooper (1926) 37 C.L.R. 368 at p. 373:

An “assessment” is not a piece of paper; it is an official act or operation: it is the Commissioner's ascertainment, on consideration of all relevant circumstances, including sometimes his own opinion of the amount of tax chargeable to a given taxpayer. When he has completed his ascertainment of the amount he sends by post a notification thereof called "a notice of assessment" . . . But neither the paper sent nor the notification it gives is the "assessment". That is and remains the act of operation of the Commissioner.

It is the opinion as formed, and not the material on which it was based, that is one of the circumstances relevant to the assessment. The assessment, as I see it, is the summation of all the factors representing tax liability, ascertained in a variety of ways, and the fixation of the total after all the necessary computations have been made.

The notice with respect to the assessment being appealed does not describe the amount of federal tax assessed, counsel complained. A sum is printed in the notice but it is the aggregate of amounts assessed under four different statutes. It is left to the taxpayer to guess what amount the respondent has assessed under the Act, the Income Tax Act of Ontario, the Unemployment Insurance Act and the Canada Pension Plan. Thus we have a situation where a taxpayer appealed to this Court from an assessment under the Act without knowing, at the time the appeal was filed, the amount of tax from which he was appealing. A taxpayer assessed under four different statutes ought to be informed of the amount assessed under each statute.

In Scott v. M.N.R., [1960] C.T.C. 402; 60 D.T.C. 1273 Thurlow, J., as he then was, was of the view that it does not follow from the foregoing reasons of Thorson, P. that (pages 414-16 (D.T.C. 1279-80)):

. . . the giving of a notice of assessment is not itself part of the fixation operation or procedure which is compendiously referred to in the statute as an "assessment", or if the giving of notice is not strictly part of the assessment itself that the assessment itself is complete until the notice has been effectively given. In Irving and Johnson (SA) Ltd. v. C.I.R., 14 S.A.T.C. 24, Watermeyer, C.J. discussed the meaning of assessment as follows at page 28:

Now the word “assessment” is defined in the Act as “the determination of an amount upon which any tax leviable under this Act is chargeable” unless the context otherwise indicates. An examir ition of various sections will show that the word is used in the Act in more senses than one. The word may denote something subjective, i.e., the mental process or act of determining such amount, but it is more usually used to denote something objective, i.e., the visible representation of words and figures of that mental process. Subjectively, an assessment is an abstraction which has no real existence until it is published by being expressed in symbols which convey a meaning to others. So long as it is locked up in the mind of the assessing officer, who is not necessarily the Commissioner, it cannot be dealt with as required by the Act. Its particulars cannot be recorded by anyone except the assessing officer; they cannot be filed (see sec. 67(2)); the Commissioner cannot issue the assessment (see sea. 67(8)), nor can he alter it. It seems clear, therefore, that in most places in the Act the word "assessment" does not mean the unexpressed thoughts of the assessing officer, but the written representation of those thoughts. Again assessment must result in a figure, it is an “amount” which has to be determined and it is that "amount" or figure which the Commissioner may "reduce" or "alter" under sec. 77(6). (See Commissioner for Inland Revenue v. Taylor (1934, A.D. 387), Commissioner for Inland Revenue v. Orkin & An. (1935, A.D. 18).)

It is inappropriate to speak about "reducing" a "thought" or reducing a mental process. It is also somewhat difficult to see how the Commissioner can "alter" the mental processes of his subordinates who assess; he can, however, alter the expressed result of their mental processes, and this must require some formal act. Presumably what is done is that the record of the assessment is altered on the instructions of the Commissioner. He probably does not make any alteration himself but gives instructions that it should be done.

As used in Section 46(1) [analogous to subsection 152(1) of the current Act] the word "assess" appears to me to be roughly equivalent to “ascertain and fix” and it seems to have two possible senses in one of which the mere acts of ascertaining and calculating only are included, and the other that of computing and stating the tax in the manner prescribed by the statute. In the latter sense, the stating is as much a part of the assessing operation itself as is the computing of the tax, and in the absence of some statutory provision for stating in another way, it would, in my opinion, be necessary to state it in such a way as to make the taxpayer aware of it.

I am accordingly of the opinion that the giving of notice of assessment is part of the fixation operation referred to as an assessment in the statute and that an assessment is not made until the Minister has completed his statutory duties as an assessor by giving the proscribed notice. See Y.W.C.A. v. Halifax, (1933) 2 D.L.R. 713.

McNair, J. offered the following explanation in Dominion of Canada General Insurance Co. v. The Queen, [1984] C.T.C. 190; 84 D.T.C. 6197 at page 196 (D.T.C. 6202):

An assessment is administrative process within the exclusive function of the Minister culminating in the ascertainment and fixation of tax liability in accordance with the requirements of the statute. The Minister is not necessarily bound by the taxpayer's return but he may quite properly accept it as correct and fix the tax liability accordingly. The assessment and the notice of assessment are different things; the one is an operation, the other a piece of paper. But the two are inextricably bound together and the assessment itself cannot be regarded as complete until the notice of assessment has been effectively given.

A notice of assessment, then, must make a taxpayer aware of the assessment and until the notice is effectively given the assessment contemplated by the Act is not complete.

The respondent's counsel submitted that there are three elements to a tax assessment: liability for tax, the assessment itself and the notice of assessment.

Ms. Sheppard, respondent's counsel, submitted that the liability for tax is determined by the Act itself. In the appeal at bar the liability arose under subsection 227.1(1) of the Act; the assessment was made under subsection 227(10).

Ms. Sheppard referred to an exhibit containing the amount of tax owing by Eastern together with calculations of tax to be assessed against the appellant. In preparing an assessment, Ms. Sheppard said, the officer of the respondent makes various calculations and the various amounts are locked in the mind of an assessor and then committed to paper in the assessment process. The taxpayer is not given the calculations but a notice of assessment which summarizes the calculations. However, counsel added, the calculations and the amounts “are available to the taxpayer at all available times, even before the assessment is issued”. The purpose of the notice of assessment is to notify a taxpayer tax has been assessed; she referred to Scott, supra, at page 415 (D.T.C. 1279).

Counsel for the respondent submitted the notice of assessment in issue advises the taxpayer has been assessed under various statutes and these amounts are reflected in the global figure. The appellant, she added, had ample opportunity to obtain particulars of the assessments but "did not get in touch with Revenue Canada. . . even up to this date". There is no evidence, she argued, that the appellant was confused by the notice of assessment. The notice of assessment performed its function of advising the taxpayer of the amounts of tax assessed.

In the initial letter from Revenue Canada to the appellant advising him he may be assessed under subsection 227.1(1) the respondent's official asked the appellant if he could provide information to establish he exercised due diligence as director in attempting to prevent Eastern's failure to pay. No reply was received by the respondent and no particulars concerning the proposed assessment were requested by the appellant. The assessment was issued nine months later. At no time, argued counsel, did the appellant request any particulars concerning the assessment, even when his wages were garnished. At no time did he complain he was confused or prejudiced by the notice.

Counsel also cited Stephens v. The Queen, [1984] C.T.C. 111; 84 D.T.C. 6114 for the authority that subsection 152(8) of the Act would cure any defect or omission in the assessment. Subsection 152(8) reads as follows:

An assessment shall, subject to being varied or vacated on an objection or appeal under this Part and subject to a reassessment, be deemed to be valid and binding notwithstanding any error, defect or omission therein or in any proceeding under this Act relating thereto.

In Stephens, the Federal Court held that an error or defect in the form of the notice of assessment did not affect the validity of the assessment. The Federal Court did not consider the error or defect in the assessment to be so substantial that the assessment ought to be vacated. An assessment containing a substantial error, defect or omission is not saved by subsection 152(8). Parliament could not have contemplated the Minister acting recklessly or negligently in performing his duties under the Act by remedying such action.

Subsection 152(8) of the Act remedies an error, defect or omission in an assessment subject to the assessment being varied or vacated on an objection or appeal. An assessment is valid and binding notwithstanding any error, defect or omission until it is varied or vacated by the Minister or the Court. Subsection 152(8) grants legitimacy to an assessment otherwise containing an error or defect or which is incomplete. It is the responsibility of the Minister during the objection stage of the appeal process to determine if there has been an error, defect or omission in an assessment and, if the error is not one of form, he is obliged to vary or vacate the assessment. If he does not and the assessment is appealed, the obligation is the Court's.

Subsection 152(2) requires that:

After examination of a return, the Minister shall send a notice of assessment to the person by whom the return was filed.

“It is well established,” wrote Mahoney, J., that "an assessment is not made until the Minister has completed his statutory duties as an assessor by giving the prescribed notice": Flanagan v. The Queen, [1982] C.T.C. 423; 82 D.T.C. 6341 at 423 (D.T.C. 6342).

It is obvious, to me at least, that in enacting section 152 of the Act, Parliament required the notice of assessment to inform the person to whom it is sent of the amount of the tax the Minister has assessed under authority of that statute. That is the purpose of a notice of assessment, to inform. An assessment, therefore, is not complete unless the notice is given in such manner that the taxpayer knows the amount of tax assessed under the appropriate statute.

In the appeal at bar the notice of assessment does not indicate any tax, interest or penalties. Amounts are written in three boxes on the notice: in one box is written $50,536.07, in the second $15,239.09, and in the third $65,775.16. An arrow pointing to the third box is followed by the words "amount unpaid is due and hereby requested" in English and “le montant impayé est échu et demandé par les présentes" in French. The explanation of the assessment refers to a "Liability . . . for $65,775.16. . .” under four statutes.

As I have already indicated, when a taxpayer receives a notice of assessment he is entitled to know the amount assessed, under what legislation he is being assessed and the reason for the assessment. An amount of tax is assessed under a specific statute. The Act provides for the Minister to assess a person for an amount payable under a provision of the Act. I ask myself if the appellant, reading the notice with respect to the assessment in issue, can reasonably determine the amount he was assessed under the Act and the reason for the assessment.

It is quite clear from the notice the Minister has informed the appellant he has a liability under four statutes, only one of which grants this Court jurisdiction to hear an appeal from an assessment. However, theappellant has no knowledge from the notice of his liability under the Act itself. All he knows is the aggregate amount assessed under four separate and distinct statutes, three of which are federal statutes and one a provincial statute. Surely any notice of an assessment issued under the Act must inform the person assessed of the amount payable under the Act; this is the whole purpose of an assessment, to let the taxpayer know the amount of tax he is assessed under a particular law: subsections 227(10) and 152(1).

Notification of the aggregate of amounts assessed under four statutes, in my view, does not inform a taxpayer of a particular amount assessed under one of the statutes. The assessment is incomplete.

The notice of assessment sent to Leung also refers to notices of assessment previously sent to Eastern. Once a person ceases to be a director of a corporation it may be very difficult, if not impossible, for the person to obtain from the corporation any particulars relating to assessments issued against the corporation which have led to him or her being assessed. Thus the respondent on his own initiative must provide the taxpayer with the documentation referred to in the notice of assessment even if the documentation relates to assessments of other taxpayers. (See M.N.R. v. Huron Steel Fabricators (London) Ltd. and Fratschko, [1973] C.T.C. 422; 73 D.T.C. 5347.) Bonner, T.C.J. made the following comments in Crossley v. M.N.R., [1991] 2 C.T.C. 2082; 91 D.T.C. 827 at pages 2083-84 (D.T.C. 828-29):

I will observe that a failure by the respondent to disclose the precise timing of each of the failures in respect of which he seeks to impose vicarious liability can seriously affect the fairness of the appeal process in cases arising under section 227.1 in which an appellant seeks to rely on subsection 227.1(3). Obviously the exercise by a director of care, diligence and skill to prevent a failure must occur before the failure has taken place. A director must be able to identify the period of time during which due diligence will entitle him to relief under subsection (3). Accordingly it is appropriate to remind the respondent that it is his duty to fully disclose ”. . .to the taxpayer the precise findings of fact and rulings of law which have given rise to the controversy". [1]

In this case the notice of assessment does not supply the missing particulars. Subsection 170(2) of the Act requires the respondent after receiving notice of an appeal to ”. . .forward to the Tax Court of Canada copies of all Returns, Notices of Assessment, Notices of Objection and Notification, if any, that are relevant to the appeal". The respondent forwarded to the Court a copy of a notice of assessment mailed to the appellant on July 13, 1988. It mentions a balance of $97,445.42 and states that it is a notice of assessment in respect of:

The liability under Subsection 227.1(1) of the Income Tax Act, Section 40.1 of the British Columbia Income Tax Act, Section 22.1 of the Canada Pension Plan and Section 68.1 of the Unemployment Insurance Act, 1971 in the amount of $97,445.42 being the amount of the unpaid deductions, interest and penalties payable by Smallwood Lumber Ltd. in respect of Notices of Assessment dated December 16, 1985, January 16, 1986, August 19, 1986 and August 20, 1986.

The notices of assessment to which reference was made were assessments made against Smallwood, not against the appellant. I assume that copies of the notices of assessment against Smallwood were not sent to the appellant. Certainly they were not transmitted to this Court under subsection 170(2). Where, as here, a notice of assessment incorporates byreference another document which is essential to complete notice, a copy of that document should be attached to the notice of assessment. I might add too that it is the duty of the respondent to include in the material transmitted to this Court copies of any document so incorporated.

I agree with the obiter in Crossley, supra. In the appeal at bar as well no notice of assessment against Eastern was adduced in evidence or transmitted to this Court.

It is well for counsel for the Minister to say that his client would have provided the information to the appellant if it had been requested. (How often I hear taxpayers testifying they would have provided information to the respondent if he had only asked!) An assessment must state clearly the amount assessed so as to make the taxpayer aware of it. If supplementary information is required to clarify an assessment, the assessment is not complete. This is the situation in the appeal at bar.

Accordingly, I need not consider the other issue raised by the appellant.

This appeal is allowed with costs. The assessment is vacated.

Appeal allowed.