Taxpayers G and C were former directors of company whose affairs and business was managed and operated by their husbands. In 2001, taxpayers had resignations prepared but never signed them. In 2008, Minister of National Revenue assessed taxpayers for source deductions that company failed to remit from 2000 to 2005, pursuant to s. 227.1 of Income Tax Act (Act) (Can.). Tax Court judge allowed taxpayers’ appeals. Judge held that there were valid and effective resignations by each of taxpayers, given preparation of draft letters and verbal communication of resignation to husbands. In alternative, judge found that C had reasonable belief she had resigned and exercised due diligence. Minister appealed. Appeals allowed. Judge erred in concluding that taxpayers resigned as directors. In absence of communication of written resignation to company, resignation was not effective. Two-year limitation period in s. 227.1(4) of Act was triggered by date of resignation, requiring objective verification of status of directors. In finding that C exercised due diligence, judge committed error on extricable question of law. Director’s belief that she had resigned had no correspondence to underlying purposes of s. 121(2) of Business Corporations Act (Ont.) and its emphasis on objectively verifiable communication of resignation to company. To allow subjective intention would undermine corporate governance.
Chriss v. R. (Sep. 22, 2016, F.C.A., David Stratas J.A., D.G. Near J.A., and Donald J. Rennie J.A., A-137-15, A-138-15) Decision at 244 A.C.W.S. (3d) 493 was reversed. 270 A.C.W.S. (3d) 440.