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Appeal under section 323 of the Excise Tax Act partly allowed. The Court reduced the derivative assessment by $5,693.79 and referred the matter back for reassessment.
The Tax Court dismissed Kurtis Astle’s appeals, holding he remained liable as a director for unremitted source deductions and that the reassessments were timely.
The Court found the appellant did not prove on a balance of probabilities that he validly resigned effective October 31, 1999 or that any Form 1 removing him was filed prior to the relevant period; the Form 1 in counsel's file and registry entries were insufficient in the face of credibility concerns and lack of objective evidence that the corporation received a written resignation, therefore the appellant remained a director within the relevant period and failed to establish the due diligence defence under s.227.1(3); appeal dismissed.
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The claimant failed to prove the elements of civil fraud: there was no evidence of a false representation known to be false or recklessness by the individual defendants that caused the claimant to act to its detriment; no guarantees existed; therefore individuals are not personally liable and judgment is limited to the corporate defendant.
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A strata corporation succeeded in a REDMA misrepresentation claim over promised renovations and reserve funding, and the director was held personally liable.
On an application to add parties, the Court allowed joinder of two directors for alleged fraudulent misrepresentation, but refused to add the realtor defendants.
The due diligence defence under s.323(3) is assessed by an objective reasonably prudent person standard with contextual modification for incapacity due to serious mental illness; the appellant failed to prove on a balance of probabilities that his mental illness rendered him incapable of taking steps to prevent the failures to remit during the relevant period, and having failed to take active remedial steps he cannot rely on the defence, so he is liable for the corporation's unremitted GST/HST for the 2013 and 2014 reporting periods but not for periods after he ceased to be a director.
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La Cour fédérale accueille le contrôle judiciaire, annule la décision d’irrecevabilité du 12 novembre 2019 et renvoie l’affaire à EDSC pour nouvel examen.
The Court applied the stringent Rule 53/obviousness test and struck only those paragraphs that were vague, irrelevant, prejudicial or constituted legal conclusions incapable of aiding resolution of the assessment validity; factual allegations supporting an alleged scheme and participant identification were retained as relevant and to be assessed at trial; respondent ordered to amend the Reply within 30 days.
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The appellant did not meet the objective due diligence standard of subsection 227.1(3); mere monthly oral enquiries ('check the box') and reliance on others, without seeking documentary proof or contacting CRA despite clear red flags about unreliable financial records, fell short of what a reasonably prudent director would have done to prevent failures to remit; therefore the director assessments under s.227.1 are upheld and the appeal is dismissed.
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