Beaubier
J.T.C.C.
(orally):—This
appeal,
pursuant
to
the
informal
procedure
of
this
Court,
was
heard
at
Vancouver,
British
Columbia
on
March
3,
1994.
The
appellant
was
the
only
witness.
Trillium
Air
Limited
("TAL")
was
incorporated
in
Ontario
on
February
12,
1985.
As
stated
in
assumptions
5(b),
(c),
(d),
(e),
and
(f)
which
were
not
refuted,
it
failed
to
remit
$4,767.81
federal
income
tax
on
account
of
employee
withholding,
for
March,
April
and
May
1990.
In
addition
interest
and
penalties
are
due
on
the
$4,767.81;
for
June
1990,
$31,422.45
employee
income
tax,
$4,960.90
employee
and
employer
contributions
of
Canada
Pension
Plan
and
$4,873.24
respecting
the
Unemployment
Insurance
Act
also
failed
to
be
paid.
The
assumptions
of
the
Crown
state
that
the
appellant
was
a
director
of
TAL
from
February
18,
1985
until
June
22,1990
and
did
not
exercise
a
proper
degree
of
care,
diligence
and
skill
to
prevent
the
failure
to
remit
by
TAL
and
therefore
is
liable
for
the
amounts
described
pursuant
to
section
227.1
of
the
Income
Tax
Act,
R.S.C.
1952,
c.
148
(am.
S.C.
1970-71-72,
c.
63)
(the
"Act").
The
appellant
appealed.
Subsection
227.1(1)
of
the
Income
Tax
Act
reads:
227.1(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
related
thereto.
The
appellant
states
that
he
was
a
director
until
he
resigned
on
June
22,
1990,
the
resignation
being
Exhibit
R-3,
which
is
dated
June
26,1990.
His
testimony
is
that
a
group
led
by
Mr.
Weaver
called
“Trillium
Aviation
Promotions”
("TAP")
offered
to
buy
all
the
shares
of
TAL
from
his
family
trust
in
about
December
1989.
He
states
that
TAP
or
others
may
have
employed
people
but
that
TAL
did
not
and
that
the
sale
was
finally
completed
on
June
15,
1990,
after
which
he
resigned
as
a
director.
During
the
period
in
question
in
1990
there
was
a
second
director
of
TAL,
Ronald
E.
Bryant.
In
those
months
the
appellant
states
that
he
was
a
consultant
to
the
purchasing
group.
Paragraph
2
of
Exhibit
R-7,
a
letter
to
Revenue
Canada
by
the
appellant’s
lawyer,
reads:
Our
client
takes
the
position
that
he
is
not
liable
in
respect
of
any
unpaid
remittances
for
Trillium
Air
Limited
since
he
was
not
involved
in
the
operations
or
management
of
the
company
for
any
period
of
time
in
respect
of
which
the
company
or
its
agents
may
failed
to
make
source
deductions.
In
fact,
Mr.
Emson
was
merely
a
consultant
to
a
group
which
purchased
the
shares
of
Trillium
Air
Limited.
They
operated
the
company
for
their
own
account.
Mr.
Emson
did
not
have
authority
to
sign
cheques
or
to
administer
funds
of
the
company.
Messrs.
Brink
Weaver
and
Ronald
E.
Bryant
(the
purchasers)
had
full
actual
and
operational
control
over
the
company
at
this
time.
Mr.
Emson
requested
on
many
occasions
that
they
complete
the
purchase
and
fill
in
their
nominees
on
the
board
of
directors
and
in
fact
Mr.
Emson
resigned
in
May
or
June
of
1990.
In
a
letter
dated
June
4,1992
(being
part
of
Exhibit
R-8)
addressed
to
Revenue
Canada,
Mr.
Bryant
stated
in
part:
In
January
of
1990,
Mr.
Brink
Weaver
through
his
lawyer
Mr.
John
Eversley
agreed
to
acquire
Mr.
Emson's
shareholding
in
614343
Ontario
Ltd.
dba
Trillium
Air
and
it
was
Mr.
Eversley’s
responsibility
to
prepare
all
necessary
paperwork.
At
this
time,
the
law
firm
went
ahead
and
changed
the
registered
name
from
614343
Ontario
Ltd.
to
Trillium
Air
Ltd.
With
the
proposed
agreement,
Mr.
Emson
took
no
further
part
in
the
day
to
day
management
of
tne
company
however
it
was
essential
to
the
well
being
of
the
airline
that
he
be
seen
as
still
being
associated
with
it.
It
was
necessary
to
retain
his
expertise
and
he
agreed
to
assist
in
a
consulting
capacity,
please
see
attached.
Repeatedly,
Emson
requested
that
Eversley
attend
to
the
paperwork
so
that
the
matter
of
the
shareholding
be
finalised
and
it
was
not
until
June
of
1990
that
the
sale
was
completed.
Trillium
Air
did
not
enjoy
any
revenues
and
did
not
require
a
bank
account.
Trillium
Air
did
not
have
it's
own
bank
account
and
there
was
no
need
or
authority
for
Mr.
Emson
to
sign
cheques.
I
would
like
to
add
that
Mr.
Emson
most
satisfactorily
attended
to
his
consulting
duties
even
though
the
relationship
with
Mr.
Eversley
deteriorated
daily
to
be
almost
non
existent.
These
statements
were
confirmed
by
the
appellant’s
testimony
in
cross-
examination.
The
evidence
is
clear
that
things
were
being
done
in
TAL's
name
and
that
the
appellant
was
going
along
with
it
and
giving
others
the
impression
that
he
was
in
charge
of
TAL
and
its
activities
so
as
to
complete
the
sale.
Moreover,
legally,
his
family
trust
owned
TAL
and
he
was
a
director
of
TAL
throughout
and
he
held
himself
out
to
be
a
director
of
TAL
while
the
proposed
purchasers
did
“their
thing"
with
and
in
the
name
of
TAL.
"Their
thing”
resulted
in,
to
quote
assumption
5(f):
a
certificate
for
the
amount
of
the
corporation's
(TAL's)
liability
for
unremitted
source
deductions
together
with
penalties
and
interest
related
thereto,
including
the
tax,
the
penalty
and
the
interest,
was
registered
in
March
1992
in
the
Federal
Court
of
Canada
pursuant
to
the
provisions
of
section
223
of
the
Act,
but
the
execution
for
such
amount
as
been
returned
wholly
unsatisfied;
The
appellant
relies
on
subsection
227.1(3)
of
the
Income
Tax
Act
in
his
defence.
It
reads:
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.
The
evidence
is,
to
quote
Exhibit
R-7,
that
Mr.
Emson
as
a
director
and
as
the
person
in
control
of
TAL
gave
the
proposed
purchasers
such
leeway
that:
They
operated
the
company
for
their
own
account.
Mr.
Emson
did
not
exercise
any
degree
of
care,
diligence
or
skill
to
prevent
the
failure.
He
was
obviously
anxious
to
complete
the
sale
and
he
gave
the
proposed
purchasers
all
they
wished
and
went
along
with
them
to
that
end.
This
resulted
in
TAL's
liabilities
in
question.
The
sale
occurred,
but
in
the
event,
the
appellant
became
liable
for
the
amounts
as
levied
by
Revenue
Canada
against
him.
The
appeal
is
dismissed.
Appeal
dismissed.
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