NOTE: THIS DECISION WAS OVERTURNED BY THE FCA: Canada v. Chriss 2016 FCA 236.
Directors may be liable for a corporation’s failure to remit employee source deductions or GST. But there is a two-year time limit on these assessments: if the director resigned more than two years before the CRA assesses, the director is not liable. (See ETA s. 323(5) and ITA s. 227.1(4).)
Here, in defending against a 2008 directors’ liability assessment, two wives claimed that they had resigned in 2001. There was no validly signed resignation document. But there was clear evidence that the wives, through their husbands, had told the corporation’s lawyers that they wanted to resign and asked the lawyers to draft the resignation. The lawyers did that but, perhaps because of unpaid fees, the lawyers never sent out the resignation for signing and the wives never signed it.
Justice Boyle accepted that the resignations were valid:
[25] I am not satisfied on a balance of probabilities that there is sufficient credible evidence to establish that the 2001 Gowlings’ resignation package left Gowlings, or that those resignations or any other (including those seemingly subsequently prepared by Gowlings in 2002) were ever signed. The OBCA specifies that a resignation be written but not that it be signed. A written resignation meaningfully communicated to the corporation was acceptable to this Court in Irvine v Minister of National Revenue, 91 DTC 91 (per Taylor, TCJ). It is also consistent with the views of this Court in Cybulski v. Minister of National Revenue, 88 DTC 1531 (per Christie, ACJ).
[26] The assessments were issued in 2008, more than two years after the 2001 Gowlings resignations by Mrs. Chriss and Mrs. Gariepy. For that reason, the appeals must be allowed as there can be no director liability assessed after that two year period by virtue of subsection 227.1(4).
That was enough to decide the case but Justice Boyle also considered that a director who reasonably believe she has resigned and so takes no more action to ensure a corporation remits GST or source deductions has, nonetheless, exercised reasonable care. So one of the wives, Mrs. Chriss, was not liable on that basis either. (See ETA s. 323(3) and 227.1(3).) (Paras. 31-32.) (The other wife, Gariepy) did not have the same facts; so she was saved only by the valid Gowlings resignation.)