I’ve seen a number of cases where a family member consents to be a director of a corporation—exactly why nobody seems to know after the fact—and then ends up being assessed for unremitted source deductions. The family member might be uneducated and barely able to speak English, but that won’t stop the assessments. The CRA and the Ministry of Revenue are unsympathetic. The courts are less cold-blooded it seems.
In Pascoal v. The Queen, 2009 TCC 608, the Court relied on Dirienzo v. The Queen, 2000 DTC 2230, for the proposition that “the appropriate degree of care, skill and diligence required for a successful due diligence defence is much lower when the directors are family members.” The Court quoted the following passage from the case (per Bowman ACJTC, as he then was):
Do the conclusions stated above absolve the appellant of his responsibilities under section 227.1? On one view of the matter, it could be said that he did not exercise the degree of care, diligence and skill contemplated by subsection 227.1(3) because he exercised none at all. On the other hand, he was a mere nominal director with no powers, no responsibilities and no say in the way the corporation was run. It is all very well to adopt a hectoring, moralizing tone and say that if people take on the responsibility of corporate directorships they should be expected to assume all the consequences of such a position. I am not however concerned with what the situation would be in a perfect world. I have to make a determination of the facts as they exist in a highly imperfect world where malleable young family members are bullied by domineering patriarchs.
