The taxpayer was a director in a corporation that was in arrears on source deductions. He attempted to address the arrears through an equity issue, loans, reductions in expenditures, and attempts to merge with another company. The trial judge took the view that "the company should continue to operate as long as there is a reasonable expectation that [a capital injection] would occur," and that the taxpayer was consequently not liable under s. 227.1(1) for the remittance failures arising while the taxpayer still had such an expectation.
The Court of Appeal found that the conclusion at trial was unacceptable, agreeing with the Crown's position (para. 17) that the conclusion, "if accepted, would pass to the Crown part of the risk associated with continuing a business which is facing financial difficulties." Mainville J.A. found that the director's duty is to prevent failures to remit (paras. 48-51). Allowing such a failure in anticipation of correcting it later will not discharge this duty. The taxpayer's circumstances did not resemble McKinnon, where the corporation's finances were effectively outside the directors' control.
Mainville J.A. also noted that while People's Store v. Wise replaced the objective-subjective standard under s. 227.1(3) with a purely objective standard, an objective standard "makes it clear that the factual aspects of the circumstances surrounding the actions of the director are important as opposed to the subjective motivations of the directors," (para. 38) and that "an objective standard does not... entail that the particular circumstances of a director are to be ignored" (para. 39).