After being approached by the incorporator ("Marney") of a pub, the appellant subscribed $10,000 for shares as a passive investment. He became an authorized signatory and was appointed secretary/treasurer and signed cheques on the basis that two signatories were required, which he would do without any document review - his involvement was minimal. He also signed various banking documents and certificates, as well as a corporate tax return, CRA RC59 business consent form and disclaimer letter in favour of CRA (all without review) showing him as a director. Marney and another individual, who had been named as the initial directors, were struck from the corporate register shortly after the commencement of operations and the name of the name of the common-law wife of Marney ("Richards"), who now was running the operations, was added to the register. However, no directors or shareholder meetings were held, noone was appointed by the shareholder as director. The appellant purchased all the remaining shares of the corporation for $1 from Richards, upon her bankruptcy. The Minster assessed the appellant personally for the corporation's GST and income tax remittance shortfalls under ETA s. 323(1) and ITA s. 227(1).
Rossiter ACJ found that the taxpayer was not so liable. After finding (at para. 37), that the appellant had not become a de jure director, he then found (at para. 39) that "the concept of de facto director ... should be limited to those who hold themselves out as directors" (para. 39), and stated (at para. 44):
[T]he Appellant was a shareholder only. …[H]e did not at any time give his consent to be a director. He did not realize that he was in fact listed as a director with the Corporations Division… until very late and once he did, he took every step possible to have his name struck from the record. He did not… complete any of the required steps to be appointed as a director… . Further, all major decisions relating to the business were made by persons other than the Appellant.