Garon,
T.C.C.J.:—Each
of
the
two
appellants
has
appealed
to
this
Court
from
the
assessment
concerning
him,
which
was
in
each
case
dated
August
15,
1986
and
was
for
the
identical
amount,
$593,575.46.
According
to
the
Minister's
notices
of
confirmation,
these
two
assessments
were
based,
inter
alia,
on
subsection
227.1(1)
of
the
Income
Tax
Act,
R.S.C.
1952,
c.
148
(am.
S.C.
1970-71-72,
c.
63)
(the
"Act"),
which
requires,
inter
alia,
that
directors
of
corporations
pay
Part
VIII
tax
together
with
any
interest
and
penalties
relating
thereto,
when
the
corporation
of
which
they
are
directors
fails
to
pay
such
tax,
as
it
is
the
case
here
for
Vidiom
II,
the
incorporated
visual
production
company,
hereinafter
referred
to
as
Vidiom
II.
These
appeals
were
heard
on
common
evidence.
First,
we
should
review
the
events
which,
technically
speaking,
led
the
respondent
to
issue
the
two
assessments
which
are
the
subject
of
these
proceedings.
During
1984
and
1985,
the
appellant
Bernard
Jacques,
and
during
part
of
that
same
period
the
appellant
Richard
Courville,
were
directors
of
Vidiom
II.
That
company
was
a
taxable
Canadian
corporation
within
the
meaning
of
the
Income
Tax
Act.
On
June
28,
1984,
the
company
in
question
issued
promissory
notes
under
a
scientific
research
and
experimental
development
financing
contract
in
accordance
with
subsection
194(4)
of
the
Income
Tax
Act,
and
designated
the
entire
$500,000
which
was
the
subject
matter
of
the
promissory
notes
in
question,
again
in
accordance
with
subsection
194(4).
It
also
filed
the
prescribed
forms
in
respect
of
these
designations.
On
August
17,
1984,
the
respondent
issued
an
assessment
against
Vidiom
II
in
the
amount
of
$250,000.
This
notice
of
assessment
was
accompanied
by
a
document
issued
by
the
respondent
which
read
as
follows:
The
enclosed
notice
of
assessment
indicates
the
tax
payable
under
Part
VIII
pursuant
to
the
filing
of
(a)
designation(s)
with
respect
to
shares
or
debt
obligations
issued
or
rights
granted
for
scientific
research
financing.
Corporations
which
have
issued
securities
which
entitle
the
holder
to
a
tax
credit
for
scientific
research
or
for
share
purchase
are
theoretically
required
to
pay
Part
VIII
tax
by
the
end
of
the
month
following
the
month
of
the
transaction,
at
the
latest.
However,
under
this
special
program,
the
tax
liability
may
be
reduced
or
cancelled
as
a
result
of
qualified
expenditures
or
tax
credits.
Given
that
Part
VIII
tax
may
be
reduced,
Revenue
Canada-Taxation
is
prepared
to
modify
or
delay
the
collection
actions
normally
undertaken
in
respect
of
such
assessments
if
the
corporation
can
show
to
the
satisfaction
of
Revenue
Canada
that
the
tax
liability
will
be
eliminated
by
the
end
of
the
corporation’s
year,
or
if
it
provides
acceptable
security.
A
Revenue
Canada-Taxation
officer
will
contact
you
to
discuss
how
this
liability
will
be
met.
We
are
also
including
a
copy
of
a
recent
press
release
explaining
the
position
of
Revenue
Canada-Taxation
in
respect
of
this
matter.
[Translation]
The
policy
set
out
in
this
document,
which
I
have
quoted
above,
was
also
presented
in
a
press
release
issued
by
the
Department
of
National
Revenue
on
June
5,
1984.
On
September
20,
1984,
Vidiom
ll
issued
a
second
group
of
promissory
notes
under
a
scientific
research
and
experimental
development
financing
contract,
in
accordance
with
subsection
194(4)
of
the
Act,
and
also
designated
the
entire
$500,000
which
appeared
on
the
promissory
notes
just
referred
to.
On
November
20,
1984,
following
this
designation,
the
respondent
was
issuing
another
assessment
against
Vidiom
II
in
the
amount
of
$250,000,
under
Part
VIII
of
the
Act.
Enclosed
with
the
notice
of
assessment
was
a
document
issued
by
the
respondent,
the
text
of
which
was
identical
to
the
document
reproduced
above
which
had
accompanied
the
assessment
of
August
17,
1984.
No
objection
or
appeal
was
filed
in
respect
of
the
assessments
referred
to
above
which
were
issued
against
Vidiom
II.
On
April
8,
1986,
Vidiom
II
was
placed
in
bankruptcy.
Finally,
as
was
noted
earlier,
on
August
15,
1986
the
respondent
was
issuing
two
assessments,
which
are
the
subject
of
these
proceedings,
to
the
two
appellants.
The
appellant
Jacques
became
bankrupt
on
September
9,
1986.
The
two
assessments
of
August
15,
1986,
in
respect
of
the
appellants
were
based
on
the
failure
of
Vidiom
II
to
pay
Part
VIII
tax
and
on
the
joint
liability
of
the
directors
to
pay
Part
VIII
tax
together
with
any
interest
and
penalties
relating
thereto,
as
prescribed
in
such
circumstances
by
subsection
227.1
of
the
Act.
On
the
other
hand,
subsection
227.1(3),
on
which
the
appellants
rely,
provides
for
the
manner
in
which
they
may
be
exonerated
from
this
liability.
That
subsection
states
that
a
director
is
not
liable
for
a
failure
under
subsection
227.1(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.
In
order
to
determine
whether
the
appellants
Courville
and
Jacques
complied
with
the
standard
of
conduct
prescribed
in
subsection
227.1(3),
we
must
examine
the
activities
of
Vidiom
II
and
the
role
played
by
the
various
actors,
and
more
particularly
by
the
appellants
themselves
and
by
the
respondent.
First,
Vidiom
II
is
the
result
of
the
amalgamation
of
two
companies
established
under
the
authority
of
section
179
of
the
Canada
Business
Corporations
Act.
The
new
legal
entity
thus
born
of
the
amalgamation
was
incorporated
on
March
27,
1984.
One
of
the
two
companies
involved
in
the
amalgamation
was
incorporated
on
April
22,
1980,
while
the
other
was
established
on
January
19,
1984.
The
latter
company
had
acquired
all
the
shares
of
Lumino-Cite
Inc.
in
February
1984.
The
head
office
of
the
new
legal
entity
was
to
be
located
in
the
territory
of
the
Montreal
Urban
Community.
As
a
matter
of
fact,
during
the
period
which
concerns
us,
that
office
was
located
at
1115
Sherbrooke
St.
West
in
Montreal.
The
main
operations
of
Vidiom
II
and
of
the
companies
which
preceded
it
were
described
as
follows
in
the
preliminary
prospectus:
The
Company's
principal
business
operations
to
date
have
been:
the
production
of
compilations
of
Computer
generated,
low
cost,
visual
special
effects
for
use
in
video
productions
and
commercials
(the"Bank
of
Visual
Effects"),
the
design
and
implementation
of
product
marketing
strategies
and
corporate
identification
programs
for
clients,
and
the
production
of
a
video
sports
series
entitled
"Of
Sports
and
Man”,
distribution
of
which
is
intended
to
begin
in
September,
1985
in
Canada
and
thereafter,
in
the
United
States
and
worldwide.
As
the
appellant
Courville
described,
the
business
of
Vidiom
II
fell
into
two
categories:
audio-visual
production
and
the
development
of
what
are
commonly
called
computer
generated
special
effects.
At
the
outset,
the
company
had
four
principal
officers:
the
appellants
Bernard
Jacques
and
Richard
Courville
as
well
as
Mr.
Dominic
laia
and
Mr.
Normand
Letourneau.
During
the
fall
of
1984,
several
other
people,
including
two
Americans,
became
directors
of
the
company.
One
of
these
Americans
was
the
president
of
a
company
called
Mathematical
Applications
Group
Inc.,
an
American
company.
During
most
of
the
relevant
period,
Vidiom
II
had
between
15
and
20
employees.
It
is
not
disputed
that
the
appellant
Bernard
Jacques
enjoyed
a
good
reputation
in
the
field;
he
was
a
founding
member
of
Global
Television
Network
and
he
had
been
the
producer
of
17
television
series.
He
was
president
and
director
of
Vidiom
II
since
it
was
formed,
and
since
1980
of
a
company
which
had
preceded
it.
Since
April
1980,
Mr.
laia
had
been
vice-president
of
Vidiom
II
and
of
a
company
which
had
been
the
subject
of
an
amalgamation.
He
was
considered
to
have
a
high
level
of
expertise
and
solid
experience
in
the
field
of
visual
effects.
As
for
Mr.
Letourneau,
another
vice-president
of
Vidiom
II,
he
had
worked
in
advertising
on
major
productions,
and
had
substantial
accomplishments
to
his
credit
in
that
field.
The
appellant
Courville,
who
is
the
only
one
of
the
officers
of
Vidiom
II
to
have
testified,
described
himself
as
a
financial
analyst.
Before
being
employed
by
Vidiom
II,
he
had
worked
for
the
Federal
Business
Development
Bank
as
a
senior
credit
officer
and
formerly
as
a
management
services
officer
for
a
total
of
six
years.
Formerly,
he
had
been
employed
by
a
trust
company
as
a
branch
accountant.
He
had
also
worked
for
a
Canadian
oil
company
in
financial
accounting.
During
the
relevant
period,
he
was
vice-president
of
Vidiom
II,
and
as
such
he
was
responsible
for
the
financial
aspects
of
the
business,
in
addition
to
being
one
of
the
directors,
as
was
noted
earlier.
Among
other
things,
he
looked
after
negotiating
contracts,
such
as
the
acquisition
of
the
Mathematical
Applications
Group
Inc.
(MAGI)
software
which
will
be
referred
to
later.
During
the
relevant
period,
at
least
at
the
beginning
of
1985,
the
appellant
Bernard
Jacques
had
about
32
percent
of
the
shares
of
the
company,
while
Messrs
laia
and
Letourneau
each
held
approximately
13
percent
of
the
shares.
The
other
five
directors
and
officers,
including
the
appellant
Courville,
had
less
than
10
percent
of
the
shares.
In
fact,
the
appellant
Courville
stated
that
during
that
period
he
had
1.8
percent
of
the
shares
of
the
company.
The
appellant
Courville
joined
Vidiom
II
sometime
around
May
1984.
He
discovered
that
this
company
was
a
small
business
which
was
markedly
undercapitalized
in
relation
to
the
plans
and
ambitions
it
cherished.
He
explained
that
during
the
first
six
months
he
participated
in
the
reorganization
of
the
company
on
an
accounting
and
legal
basis.
The
appellant
Courville
stated
that,
in
June
1984,
the
company
was
in
the
development
stage;
it
had
a
lot
of
potential
and
its
liabilities
were
not
too
substantial.
It
had
established
a
major
development
program.
A
technical
document
dated
June
30,
1984
was
prepared
and
entitled
Vidiom's
Development
Program”,
which
explained
the
various
elements
of
this
program.
The
following
passages
from
the
testimony
of
the
appellant
Courville
on
this
program
are
of
very
particular
interest:
Q.
Mr.
Courville,
if
I
may
refer
you
to
Exhibit
A-1,
you
see
at
page
3,
I
don't
know
whether,
I
put
page
numbers
on
my
copies,
I
don't
know
whether,
at
page
3
you
see
the
title:
“Research
and
Development
Program""Vidom
is
embarking
upon
a
series
of
development
programs
amongst
which
are:
The
integration
of
live
action,
motion
controlled,
video/film
images
with
three-
dimensional
and
two-dimensional
animations
created
by
Vidiom's
SynthaVision
system."
Can
you
just
tell
us
what
you
understand
to
be
the
company's
development
program.
What
was
planned?
A.
The
company
was
planning
to
integrate
the
live
image,
to
mix
it
with
the
synthetic
image.
To
give
an
example,
if
anyone
has
seen
the
movie"
Roger
Rabbit”,
where
animation
was
combined
with
the
live
image.
Well,
the
company,
what
it
wanted
to
do,
wasn't"
Roger
Rabbit",
but
rather
to
do
its
backgrounds
in
synthetic
images,
and
in
three
dimensions,
and
then
incorporate
the
live
image
with
it
to
establish
relationships,
in
both
scientific
and
communications
terms,
which
was
one
of
the
company's
purposes.
It
was
also
used,
as
this
type
of
technique
is
used
today,
and
animations
for
training
airplane
pilots,
for
various
types
of
training.
However,
at
that
time,
and
even
today,
I
do
not
think
that
it
still
exists,
the
development,
the
basis
being
the
SynthaVision
product
which
was
created
by
Mathematical
Applications
Group—if
you
like
I
will
call
it
MAGI,
that
will
be
more—gave
us
about
80
percent,
90
percent
of
the
technique
we
were
looking
for
as
a
base
and
which
then
had
to
be
developed.
And
then
with
the
scientists
who
were
at
MAGI,
and
those
the
company
was
looking
for
to
be
able
to
complete
its
core
and
to
take
it
one
step
farther,
they
are
needed
for
the
communications
field,
and
the
example
we
always
gave
was:
a
real
estate
developer
who
has
a
project
to
present,
instead
of
presenting
it
on
boards,
then
on
paper,
then
with
models
which
are
still
very
sterile,
without
showing
how
it
feels,
he
can
present
a
video
where
the
person
could
go
into
the
finished
building,
walk
around
inside
with
the
colour
of
the
rugs,
the
colour
of
the
walls,
the
product,
and
then
in
engineering
terms,
where
you
could
divide
the
building
in
half,
and
see
everything,
the
way
it
was
built
inside.
[Translation]
The
participation
of
the
appellant
Courville
was
in
relation
to
the
steps
to
take
in
order
to
secure
additional
funding,
which
led
Vidiom
II
into
what
has
been
called
the
"flips"
of
June
and
September
1984.
I
am
referring
to
the
two
sets
of
promissory
notes
issued
by
the
company,
one
on
June
28,
1984
and
the
other
on
September
20,
1984,
which
were
discussed
earlier.
The
evidence
also
established
that
before
the
two
sets
of
promissory
notes
in
question
were
issued
in
June
and
September
1984,
vidiom
II
had
acquired
certain
rights
to
a
system
called
SynthaVision
Animation
System
from
Mathematical
Applications
Group
Inc.,
an
American
company
which
was
referred
to
earlier,
under
a
document
entitled
License
Agreement",
dated
May
9,
1984.
The
company
had
made
an
initial
payment
of
$57,500,
which
is
described
as
an
"Advance
Fee”,
and
in
addition
had
paid
$431,250
in
two
payments
in
June
and
December
1984.
The
agreement
of
May
9,
1984
with
Mathematical
Applications
Group
Inc.
was,
in
one
sense,
completed
with
the
acquisition
of
all
of
the
assets
of
that
American
company
when
a
contract,
entitled
"Asset
Purchase
Agreement",
was
signed
on
February
7,
1985.
In
addition
to
issuing
the
sets
of
promissory
notes
used
to
finance
scientific
research
and
experimental
development,
Vidiom
II
decided
to
try
to
secure
funds
on
the
American
market
through
a
public
share
offering.
The
company
had
a
fixed
commitment
with
an
American
broker
by
the
name
of
Wegard,
who
had
given
the
necessary
assurances
in
terms
of
the
possibility
of
securing
funds
to
pursue
Vidiom's
development
program.
To
this
end,
preparation
of
a
prospectus
had
been
undertaken
in
June
1984.
The
appellant
Courville
explained
that
writing
such
a
document
was
a
major
task,
because
of
the
strict
requirements
of
the
United
States
Securities
Commission:
data
had
to
be
provided
on
a
consolidated
basis
for
the
business
of
Vidiom
II
and
the
two
companies
which
had
been
involved
in
the
amalgamation;
all
of
the
financial
statements
had
to
be
redone,
and
had
to
be
done
for
a
period
of
five
years
back,
given
that
there
had
been
two
entities
prior
to
the
amalgamation.
This
witness
explained
that
36
draft
financial
statements
were
prepared.
The
draft
prospectus,
filed
as
Exhibit
A-ll,
indicates
that
the
intention
was
to
offer
800,000
units
to
the
public,
each
unit
consisting
of
three
common
shares
and
two
warrants.
It
was
hoped
that
it
would
be
possible
to
secure
a
total
of
nearly
4
million
American
dollars.
It
is
interesting
to
note
the
following,
which
appears
under
the
heading
"Use
of
Proceeds"
in
the
draft
prospectus:
The
net
proceeds
of
this
offering
will
be
used
to
purchase
the
SynthaVision
technology
for
computer
generated
imagery,
to
establish
computer
facilities
in
Montreal,
Canada,
and
New
York
City,
to
exploit
the
SynthaVision
technology
and
to
further
enhance
and
develop
the
Synthavision
technology
and
for
general
corporate
purposes,
including
working
capital.
The
prospectus
was
finally
filed
in
May
1985.
Following
filing
there
was
a
four-week
waiting
period.
It
was
at
this
point
that
it
was
noticed
that
source
deductions
from
salaries,
in
the
amount
of
$25,000,
had
not
been
paid
by
Vidiom
II.
This
issue
was
submitted
to
the
company's
board
of
directors,
which
had
decided
that
the
appellant
Jacques
should
correct
this
failure
as
soon
as
possible.
If
the
payment
of
the
source
deductions
was
not
made,
the
prospectus
would
have
to
be
amended
to
disclose
this
type
of
liability.
Shortly
thereafter,
the
respondent's
notice
of
assessment
relating
to
this
failure
to
pay
source
deductions
was
sent
to
Vidiom
II.
There
was
a
disagreement
within
the
company
as
to
the
importance
of
paying
these
deductions.
The
appellant
Jacques
and
Mr.
Letourneau
did
not
consider
it
to
be
a
priority
at
all.
The
appellant
Courville
and
the
others
took
a
diametrically
opposed
view.
The
issues
relating
to
payment
of
source
deductions
and
payment
of
Mr.
Letourneau's,
but
more
particularly
of
the
appellant
Jacques's,
expenditure
accounts;
the
issue
of
the
latter's
investment
in
another
company
which
appeared
in
the
prospectus;
the
issue
of
a
certain
account
receivable
of
a
million
dollars;
all
these
issues
created
deep
divisions
within
Vidiom
II
and
led
all
the
directors,
except
the
appellant
Jacques
and
Messrs,
laia
and
Letourneau,
to
resign
as
a
group
in
July
1985.
Shortly
thereafter,
the
appellant
Courville
informed
the
company's
American
lawyers
and
the
broker,
Mr.
Wegard,
that
it
would
be
preferable
to
withdraw
the
prospectus,
which
was
officially
done
at
the
end
of
September
1985.
I
would
like
first
to
consider
the
case
of
the
appellant
Courville.
The
major
criticism
made
of
him
by
counsel
for
the
respondent
was
that
he
had
at
the
time
been
a
director
of
a
company
which
had
set
off
on
a
risky
project.
On
this
point,
it
was
noted
that
one
of
the
financing
methods
to
which
the
company
resorted
was
using
what
are
called
"quick
flips’
on
two
separate
occasions
during
1984.
It
was
argued
that
issuing
promissory
notes
was
a
particularly
audacious
operation
in
the
circumstances.
The
consequences
of
this
method
for
the
company,
with
the
designations
made
for
the
full
amount
of
the
promissory
notes
under
the
provisions
of
subsection
194(4),
was
a
tax
liability
of
$500,000,
as
shown
in
the
assessments
dated
August
17
and
November
20,
1984,
respectively.
However,
this
income
tax
could
be
cancelled,
as
it
were,
if
scientific
research
of
the
necessary
value
were
to
be
carried
out.
It
is
clear
from
the
evidence
that
payment
of
the
$250,000
in
income
tax
established
by
each
of
the
two
assessments
was
not
required
by
the
Department
of
National
Revenue
at
the
end
of
the
month
following
the
transactions
in
question,
at
the
latest,
as
provided
by
section
[sic]
195(2).
The
notice
which
accompanied
each
of
the
assessments
in
question,
the
text
of
which
was
set
out
earlier,
leaves
no
doubt
on
this
point.
Moreover,
the
same
is
true
of
the
press
release
of
June
5,
1984.
In
accordance
with
the
policy
of
the
Department
of
National
Revenue,
which
was
well
established
at
the
time,
an
official
of
that
Department
contacted
the
appellants
Courville
and
Jacques
and
undertook
a
summary
examination
of
the
available
financial
statements,
and
concluded,
as
we
may
infer
from
his
testimony,
that
this
was
a
serious
project.
The
evidence
indicates
that
all
the
necessary
information
was
provided
to
that
official.
This
project
obviously
involved
some
risk,
but
the
competent
authorities
of
the
respondent
did
not
feel
that
pursuing
the
project
was
so
risky
as
to
justify
taking
special
measures
in
terms
of
collecting
the
tax.
Payment
of
the
tax
could
be
delayed,
I
presume,
for
a
reasonable
time,
in
order
to
permit
the
company
to
do
the
scientific
research
work
which
was
to
be
financed,
at
least
in
a
large
part,
through
the
public
offering
on
the
American
market.
It
was
also
mentioned
that
at
the
time
the
assessments
were
issued,
in
August
and
November
1984,
the
company's
short
term
liabilities
exceeded
its
short-term
assets
and
there
was
also
a
deficit
in
the
working
capital.
The
question
of
whether
the
company's
pursuit
of
its
development
program
might
engender
eligible
expenditures
for
scientific
research
and
experimental
development
was
also
argued
before
this
Court.
The
evidence
on
this
point
is
not
the
most
conclusive;
I
do
not
believe
that
it
is
necessary,
for
the
purposes
of
this
appeal,
for
me
to
decide
on
this
point
since
the
issue
here
is
whether
or
not
the
appellants
met
the
standard
set
out
in
subsection
227.1(3)
of
the
Act,
taking
into
account
the
fact
that
Vidiom
II
failed
to
pay
tax
under
Part
VIII
of
the
Income
Tax
Act.
It
will
be
recalled
that
this
liability
to
pay
had
been
stated
in
two
assessments
sent
to
Vidiom
II
in
respect
of
which
there
was
no
objection
or
appeal.
On
the
evidence
as
a
whole,
I
am
satisfied
that
the
company's
research
program
was
serious
and
that
the
company
was
managed
by
people
from
various
disciplines
who
were
competent
in
their
respective
fields
and
had
the
necessary
experience.
There
is
no
doubt
that,
according
to
the
evidence,
the
appellant
Courville
believed
in
the
possibilities
for
success
of
this
company's
research
program,
and
its
capacity
to
carry
out
the
undertaking
in
which
it
was
involved.
He
devoted
considerable
effort
to
preparing
a
prospectus
for
the
purpose
of
a
public
share
offering
by
this
company
on
the
American
market.
Several
other
experienced
people
also
believed
in
the
viability
of
this
company;
major
transactions
have
been
concluded
by
Vidiom
II
during
1984
and
in
early
1985.
I
am
referring
particularly
to
the
two
transactions
with
the
American
company
Mathematical
Applications
Group
Inc.,
referred
to
earlier.
In
short,
I
am
of
the
opinion
that
the
appellant
Courville
cannot
be
criticized
for
having
participated
as
a
director
in
this
company's
financing
activities.
I
do
not
believe
that
we
can
consider
the
mission
pursued
by
the
company
during
the
relevant
period,
in
1984
and
1985,
as
a
mission
impossible
or
a
mission
so
surrounded
by
risk
that
a
reasonably
prudent
person
would
not
have
got
involved
in
it.
If
we
accept
that
in
pursuing
its
operations
Vidiom
II
had
a
reasonable
chance
of
success
in
1984
and
1985,
the
evidence
also
shows
that
the
appellant
Courville
did
everything
he
could
during
the
crucial
period,
particularly
in
the
spring
and
early
summer
of
1985,
to
have
the
company
honour
its
debts,
and
to
proceed
with
the
vital
operation
of
the
public
offering
of
the
shares
in
question
on
the
American
market.
The
appellant
was
not
criticized
for
his
conduct
in
the
final
weeks
preceding
his
resignation.
I
am
therefore
of
the
opinion
that,
at
all
times
during
his
tenure
as
director
of
Vidiom
II,
the
appellant
Courville
met
the
standard
of
conduct
required
by
subsection
227.1(3).
I
therefore
find
that
the
appeal
of
the
appellant
Courville
must
be
allowed,
and,
accordingly,
I
vacate
the
assessment
dated
August
15,
1986
which
was
established
under
section
227.1
with
respect
to
the
failure
of
Vidiom
II
to
pay
the
tax
under
Part
VIII
of
the
Income
Tax
Act.
Costs
are
awarded
to
the
appellant
Courville.
It
remains
for
me
to
discuss
the
liability
of
the
appellant
Jacques.
The
preceding
comments
with
respect
to
the
serious
nature
of
the
mission
pursued
by
the
company
in
1984
and
1985,
and
the
reasonable
possibilities
for
success
of
the
company's
undertaking,
obviously
apply
to
our
consideration
of
the
liability
of
the
appellant
Jacques.
This
is
undoubtedly
an
important
factor
which
must
be
taken
into
account,
but
it
is
not,
however,
the
only
factor.
Indeed,
I
am
of
the
opinion
that
the
appellant
Jacques
has
not
established
that
in
the
final
months
of
1985,
preceding
the
withdrawal
of
the
prospectus
and
the
resignation
of
the
majority
of
the
directors,
he
acted
with
the
degree
of
care,
diligence
and
skill
to
prevent
the
failure
by
the
company
to
pay
tax
under
Part
VIII.
The
appellant
Jacques
had
the
burden
of
proof
which
required
him
to
demonstrate
this,
and,
in
my
opinion,
he
has
not
succeeded.
He
did
not
testify
at
the
hearing
of
these
appeals,
and
I
am
permitted
to
deduce,
at
the
very
least,
that
he
would
not
have
contributed
any
positive
or
significant
element
which
would
have
tended
to
exonerate
him
from
the
liability
imposed
on
directors
in
certain
circumstances
by
the
Income
Tax
Act.
Moreover,
his
attitude
with
respect
to
payment
of
the
source
deductions
leads
me
to
believe
he
was
unconcerned
about
his
tax
liabilities.
If
he
had
had
a
proper
sense
of
responsibility
during
the
spring
of
1985
and
had
brought
his
full
co-operation
to
bear,
it
is
not
unreasonable
to
think
that
the
company
could
have
moved
ahead
and
proceeded
with
the
public
offering
of
the
shares
in
question
on
the
American
market.
His
attitude
concerning
the
payment
of
his
expenditure
accounts,
the
amount
of
which
had
been
criticized
by
some
officers
of
this
company,
such
as
the
appellant
Courville,
leads
me
to
believe
that
the
appellant
Jacques
was
guided
solely
by
his
personal
interests
during
this
critical
period.
Accordingly,
I
hold
that
the
appeal
to
which
Sydney
Pfeiffer
was
a
party
in
his
capacity
as
trustee
in
the
bankruptcy
of
Bernard
Jacques
is
dismissed.
The
respondent's
assessment
is
accordingly
upheld
with
respect
to
Bernard
Jacques.
Appeal
of
Courville
allowed;
appeal
of
Jacques
dismissed.
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