In Singh v R, 2019 TCC 120, the taxpayer had been assessed as a director of a corporation for its unremitted HST. The issue considered by the Court was whether, as the taxpayer claimed, he had resigned more than two years before the date of the assessment in issue (per subsection 323(5) of the Excise Tax Act).
The Crown tried to argue that the Court should draw an adverse inference from the fact that the taxpayer, in response to two letters from the CRA about his potential liability as a director, never mentioned that he had resigned. The Court responded:
[37] Firstly, with respect to the first two unanswered Canada Revenue Agency demands, the first two Canada Revenue Agency demand letters specifically addressed due diligence defences of directors. Mr. Singh did not advance such an argument then, in his notice of appeal, or before this Court. Only the first Canada Revenue Agency letter vaguely references his status as a director, the second, not at all.
…
[41] Now if the letter had said perhaps, “If you are not a director of the corporation or, if you had not been a director of the corporation, please provide us with evidence,” as it did for due diligence defences, then, if Mr. Singh thereafter had not provided such evidence, the Court might give weight to this inverted rebuttal argument of the Crown.
The Crown also argued that the director’s register, while it reflected the taxpayer’s resignation, did not properly reflect the status of the individual who took his place, to which the Court responded
[46] The third point was that the directors’ register is incomplete. The incompleteness of the directors’ register is not strictly relevant to Mr. Singh’s resignation. Not dissimilar from the imperfect quality of the evidence above, it adds rather than detracts from credibility because it has not been over presented or sanitized through the advantage of the passage of time or the ability to effect curative provisions.
Finally, did it matter that the taxpayer had not filed a Form 1 to give notice of his resignation? Practically it did: it seems likely that the CRA wouldn’t have pursued the matter to court, if the taxpayer had filed it. Legally, however, the failure to file the Form 1 was not decisive:
[48] This again is, strictly speaking, not the legal test for effective resignation as provided for under section 121 of the OBCA. This alone—that is to say, the absence of that [Corporations Information Act] filing—is likely the reason this appeal has made it this far.
[49] Legally, a director ceases to hold office when he or she resigns or at the date such resignation references, whichever is later. He or she resigns when it is effective, and that occurs when a written resignation is received by the corporation.
Appeal allowed.
