In Gariepy v. the Queen (2014 TCC
254), the Tax Court considered (i) whether two directors had
effectively resigned from their positions, and (ii) if not, whether
the directors were duly diligent in seeking to prevent the failure
of the company to remit source deductions.
In Gariepy, the two directors argued that they
were not liable under subsection 227.1(1) of the Income
Tax Act (Canada) (the "Act") for $500,000
in unremitted source deductions of 1056922 Ontario Limited (the
"Corporation") on the basis that they had resigned as
directors more than two years prior to the assessment. In the
alternative, the two directors put forth a due diligence
defence.
The two appellants were the only directors of the Corporation,
but it was in fact managed and operated by their husbands. After
approximately two years, the husbands decided it was time for their
wives to cease to be directors and have themselves appointed. One
of the husbands – Mr. Chriss – contacted
