Canada v. Wellburn
T-820-90 / T-821-90
MacKay J.
21/6/95
23 pp.
Actions to set aside decision of Tax Court of Canada allowing appeals of defendants from reassessments by Minister of National Revenue-Tax payable by corporation of which defendants directors, liable to withhold from employees and to remit in accord with Income Tax Act, Regulations-Application of Act, s. 227.1 limiting period of vicarious liability of former directors for failure of corporate employers to remit deductions for tax from employees-Defendants sole directors of Olympic Hotels Ltd. (Olympic)-Both involved in day-to-day operations of hotel-Hotel failing in late 1984 to remit deductions at source from employees for income tax-Following appointment of receiver manager in November 1984, Olympic assessed by MNR on February 20, 1985 in regard to failure to remit taxes, including deductions in respect of employees, due for October 1984-On February 25, 1985, defendants signed brief note to Olympic Hotels Ltd. purporting to tender resignations as directors, officers of Olympic-By notice of assessment dated March 24, 1987, under s. 227(10)(a), each of defendants as director of Olympic assessed in respect of total taxes, interest and penalties unpaid by Olympic in relation to taxes company required to withhold and remit for October 1984-Tax Court of Canada ruling limitation period of two years for claims against defendants as directors commenced with appointment of receiver, defendants thus entitled to benefit of limitation period of two years under s. 227.1(4), not vicariously liable as directors for amount of tax not remitted by corporation-Decision of Tax Court turning on interpretation of s. 227.1(4)-Purpose of s. 227.1 to create vicarious liability of corporate directors for acts or omissions of corporations in regard to source deductions for tax from employees' wages and remission of moneys-Act not defining when corporate director ceases to hold office or to be director for limited purpose under s. 271.1 of prescribing vicarious liability of director in relation to deduction and remission of taxes at source by corporation-Appointment of receiver manager on November 28, 1984 not marking date on which defendants ceased to be directors of Olympic for purposes of s. 227.1(4)-Limitation period established by s. 227.1(4) commences when director ceases to hold office in accord with law applicable to corporation-Decision of Tax Court in error in application of s. 227.1(4)-If defendants resigned from office as directors by memorandum of February 25, 1985 and resignation effective more than two years before assessments issued on March 24, 1987, defendants entitled to benefit of two-year prescription period under s. 227.1(4)-Determination of when letter of resignation delivered to registered office of company key to resolution of defendants' liability for tax-Document dated February 25, 1985 delivered to registered office of company, by Wellburn's delivery to solicitor's secretary, within terms of B.C. Company Act, s. 154(2)-Delivery made within few days of signature of documents when became effective, more than two years before assessments of March 24, 1987-Action to recover against each of defendants prescribed by s. 227.1(4)-Income Tax Act, S.C. 1970-71-72, c. 63, ss. 227(10)(a) (as am. by S.C. 1980-81-82-83, c. 140, s. 123(2)), 227.1(4) (as enacted idem, s. 124(1))-Company Act, R.S.B.C. 1979, c. 59, s. 154(2).