In Singh v R, 2019 TCC 120, the taxpayer had been assessed as a director of a corporation for its unremitted HST. The issue considered by the Court was whether, as the taxpayer claimed, he had resigned more than two years before the date of the assessment in issue (per subsection 323(5) of the Excise Tax Act).
The taxpayer was not personally liable as a director of a corporation for unremitted HST and source deductions. She had signed the articles of the relevant corporation. But she had not signed an incorporation agreement, as required by BC law, and she had never consented to being a director or signed any other document indicating that she was a director. She had signed a “partnership” agreement that had contemplated the incorporation of a corporation, but the Court found that this did not constitute an incorporation agreement.
She was not liable as a de facto director either. She had never held herself out to be a director, and she had never performed any management functions.
Le v R, 2018 TCC 65 (informal procedure)
Subsection 227.1(2) of the Income Tax Act (Canada) provides that a director is not personally liable for unremitted source deductions unless
(a) a certificate for the amount of the corporation’s liability referred to in that subsection has been registered in the Federal Court under section 223 and execution for that amount has been returned unsatisfied in whole or in part;
(b) the corporation has commenced liquidation or dissolution proceedings or has been dissolved and a claim for the amount of the corporation’s liability referred to in that subsection has been proved within six months after the earlier of the date of commencement of the proceedings and the date of dissolution; or
(c) the corporation has made an assignment or a bankruptcy order has been made against it under the Bankruptcy and Insolvency Act and a claim for the amount of the corporation’s liability referred to in that subsection has been proved within six months after the date of the assignment or bankruptcy order.
The onus is on the Crown to prove compliance with paragraph (a) above, and a failure to meet that onus is fatal to a claim that a taxpayer is liable under s 227.1(1) even where the taxpayer fails to raise the issue in his or her pleadings. Custodio c R, 2018 CCI 47, relying in part on Walsh v R, 2009 TCC 557, paras. 27-29.
See also Savoy v R, 2011 TCC 35.