Date:
20101202
Docket: A-377-09
A-378-09
Citation:
2010 FCA 330
CORAM: SHARLOW
J.A.
TRUDEL
J.A.
STRATAS
J.A.
BETWEEN:
JOHN
SEBASTIAN BUTTERFIELD
Appellant
and
HER MAJESTY
THE QUEEN
Respondent
REASONS FOR JUDGMENT OF THE
COURT
(Delivered
from the Bench at Vancouver, British Columbia, on December 2, 2010)
TRUDEL J.A.
[1]
These
are two
consolidated appeals from judgments of the Tax Court of Canada dismissing Mr.
Butterfield’s appeals from assessments made against him as the sole director of
C. Davis Manufacturing Co. Ltd. (2009 TCC 575, Miller J. (the Judge)). On
December 1, 2003, the company was assigned into bankruptcy. The appellant was
assessed pursuant to the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.)
(the ITA) and the Excise Tax Act, R.S.C., 1985, c. E-15 (the ETA)
(together the Acts) for the balance of the company’s unremitted source
deductions and GST left owing after the discharge of the bankruptcy trustee.
[2]
For
the purpose of
these appeals, suffice it to mention that the Acts state that the directors of
the corporation at the time the corporation failed to comply with its
obligations to withhold and remit are jointly and severally liable, with the
corporation, for the unpaid amounts and any interest or penalties relating to
them (subsection 227.1(1) ITA and subsection 323(1) ETA). However, to recover
any amount so payable from a director, the action must be commenced within two
years after he or she “last ceased to be a director of that corporation”
(subsection 227.1(4) ITA and subsection 323(5) ETA).
[3]
This
statutory
requirement has been the focus of the proceedings throughout. We need only
answer the following question: Did the Judge err in finding that Mr.
Butterfield last ceased to be a director less than two years before February 14,
2006, the date of the contested assessments? The answer is no.
[4]
Mr.
Butterfield does
not contest the well-established principle that an assignment in bankruptcy
does not trigger a director ceasing to be a director (Kalef v. Canada
[1996] F.C.J. No. 269; Her Majesty the Queen v. William George Wellburn and
John F. Perri, 95 DTC 5417, Worrell v. Canada, [2000] F.C.J. No.
1730, Lassonde v. Canada, [2001] F.C.J. No. 1080).
[5]
Rather, he argues, as he also did in
the Court below, that “the circumstances of his rude removal from the affairs
of the company by the trustees no longer allowed him to perform the
functions of a director” (reasons for judgment, at paragraph 7) [Emphasis
added]. That event occurred on December 12, 2003. In argument in this Court,
the appellant submitted that as a result of this event, he was in effect
constructively dismissed and, therefore, ceased being a director as of December
12, 2003.
[6]
In
support of his
argument, the appellant relies on the definition of director in the Company
Act, R.S.B.C. 1996, c. 62 (repealed by the Business Corporations Act,
S.B.C. 2002, c. 57, s. 445(a) as of March 29, 2004 (B.C. Reg. 64/2004)), which
states that a director:
… includes every person by whatever
name designated who performs functions of a director [Emphasis added]
[7]
The Judge
did not accept Mr. Butterfield’s argument. Firstly, the Judge found no need to
rely on the definition stated above as the appellant had been properly
appointed as the sole director of the company under the provincial legislation.
Secondly, the evidence was that Mr. Butterfield never tendered his resignation
and remained a director until the company was struck from the British Columbia
Corporate and Personal Property Registries on July 4, 2005. This was then the
date on which the appellant “last ceased to be a director.” It ensued that the
assessments were not statute-barred.
[8]
In appeal,
Mr Butterfield argues that the Judge erred in his interpretation of section 130
of the Company Act, when he held that a director can "only cease to
be a director by the limited provision set out in section 130 of the Company
Act."
[9]
It
reads as follows:
(1) A director ceases
to hold office when his or her term expires in accordance with the articles, or
when he or she
(a) dies or resigns,
(b) is removed in
accordance with subsection 3,
(c) is not qualified
under subsection 114; or
(d) is removed in
accordance with the memorandum or articles.
(2) every resignation
of a director becomes effective at the time a written resignation is delivered
to the registered office of the company, or at the time specified in the
resignation, whichever is later."
[10]
The
appellant
suggests that section 130, much like the definition of director, is an
inclusionary and non-exhaustive provision such that it would allow a director
to cease holding office in any and all circumstances, including those mentioned
in the statute, whenever a director is precluded from performing the functions
of a director.
[11]
Despite
Mr. Butterfield’s
best efforts, we disagree with his interpretation and see no error of principle
or any other error in the Judge’s reasoning, which would warrant the
intervention of this Court. The appellant cannot simultaneously claim that the
December 1 bankruptcy did not result in him ceasing to be a director, but that
his last visit at his office on December 12 and what he perceived as his constructive
dismissal did, in the absence of any statutory power by the trustee to remove
him as director.
[12]
Therefore, the appeals will be
dismissed with one set of costs. A copy of these reasons will be filed in the
Registry of this Court in relation to appeal A-378-09.
“Johanne
Trudel”
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