The individual appellant (“Demers”) was a director at all relevant times of a corporation that owned and operated a minor professional hockey team that played in the Ligue Nord-Americaine de Hockey from 2004 to 2008. It had been treating its players (and other staff) as employees rather than independent contractors for Quebec health tax purposes in accordance with the views of the ARQ which had been expressed to the League. However, in 2006, it commenced to treat them as independent contractors in order to reduce operational costs. The players did not register for GST/QST purposes or invoice for their services, and refused to sign a written contract (which did not reflect the realities of how the team continued to be operated), and the only substantive change made was that the team manager was incorporated. The ARQ assessed Demers under the relevant Quebec equivalent of s. 227.1 given that the team owner had been wound up without remitting source deductions.
After finding that the players in fact were still employees, so that the ARQ assessments of the team owner for failure to remit were well founded, Cotnam JCQ next dealt with the due diligence defence of Demers under the equivalent of ITA s. 227.1(3), which was based on the proposition that he had been advised by his tax advisor, Ms. Rochette (who was also his wife and a director of the team owner) that the players were independent contractors. In rejecting this defence, Cotnam JCQ noted that the views of Ms Rochette were based on a factually incorrect matters that could have been readily checked by her, including that the players could play for other teams, that they had their own tools and that the team did not reimburse the players for their expenses, and also noted that Ms. Rochette had not consulted the jurisprudence. She then stated (at paras. 187, 206, TaxInterpretations translation):
Mr. Demers, in his capacity of director, could not blindly rely on an opinion whose assumptions were clearly incomplete. He knew the functionings of the Team and the realities of the League. …
Mr. Demers is an experienced director. Nothing permitted him to believe that the cosmetic changes made to the structure of the Corporation sufficed to change its tax obligations and to terminate its obligations to collect and remit the source deductions for personnel.
However, the assessment of Demers was statute-barred as having been made beyond the four-year prescription period as the ARQ had not established carelessness or neglect of the Corporation or Demers.