Jafarnia v R, 2023 TCC 171, restates a hard truth for directors of private corporations: you will not avoid liability for unremitted source deductions if you fail to remit them because you believe the business will turn around and money will become available to make good the deficiency.
[83] The Respondent cited Maxwell [2015 TCC 74] in support of his position that the due diligence defence is unavailable to the Appellant. In that decision, Justice D’Arcy accepted that the Appellants believed that they would collect the monies owing to them from third parties and eventually be able to make the remittances. However, Justice D’Arcy found that the failure to make the remittances in the belief that this failure could be corrected in the future did not constitute a defence under subsection 227.1(3) ITA.
[84] Applying the Court’s decision in Maxwell to the Appellant’s circumstances, even if the Appellant sincerely believed that he would be eventually able to make the remittances, this belief is insufficient to avail himself of the defence under subsection 227.1(3) ITA which specifically requires the director to “prevent the failure” to make the remittances.
