Tax Court of Canada


Taxation

GOODS AND SERVICES TAX
No actions taken by directors to prevent failure to remit HST

Appeal by directors from assessments by Minister under Excise Tax Act (Can.). First Nation was preferred shareholder of corporation. Restaurant on reserve was corporation’s only asset. At board meeting, band presented directors with proposal to put restaurant into bankruptcy. Subsequent to board meeting, two directors worked with company to develop recovery plan. Two directors resigned as directors in February 2007, and restaurant was closed in November 2007. Minister assessed each of two directors, under s. 323 of Part IX of Act, $34,584.84 in respect of failure of corporation to remit net tax in respect of reporting periods ending September 30th and December 31 2006, interest and penalties. Two directors filed notices of objection to assessments. Minister confirmed assessments. Appeals dismissed. Two directors were jointly and severally, or solidarily, liable under s. 323(1) for corporation’s failure to satisfy its remittance obligations under Act. No evidence of actions taken by two directors to prevent failure by corporation to remit HST was provided. It was clear that first director was aware of corporation’s failure to remit its net tax on statutory filing dates. First director should have taken some positive steps to ensure that corporation made HST remittances in timely fashion. First director had not established, on balance of probabilities, that he exercised required degree of care, diligence and skill to prevent failure to remit. It was clear that second director was aware that corporation was suffering from financial difficulties at end of 2005. Second director took no positive steps to assure himself that corporation was remitting HST. Second director could not avail himself of due diligence defence provided in s. 323(3).


Power v. Canada

(July 27, 2011, T.C.C., D’Arcy J., File No. 2010-1670(GST)I; 2010-1671(GST)I) 205 A.C.W.S. (3d) 272 (18 pp.).

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