In October 2000, a newly-incorporated corporation of of the taxpayer (the "Corporation") acquired all the assets of a bankrupt truck repairs company ("Beverley") in which the taxpayer had invested as well as continuing to retain the services of Beverly's manager who, in turn, continued to some extent to be overseen by a business associate of the taxpayer. The assets of the Corporation were sold later a year later.
Woods J. found that the taxpayer was liable under s. 227.1(1) for the unremitted source deductions of the Corporation in 2001, and that he had not satisfied the due diligence defence in s. 227.1(3). The report of the trustee in bankruptcy that there had been substantial source deduction failures by Beverley should have put the taxpayer on notice that his close attention to source deduction compliance by the Corporation was required. Furthermore, he did not take any action following being informed by CRA in March 2001 that the Corporation already had source deduction arrears, other than having one meeting with the manager and the business associate. Respecting a submission that the taxpayer had not been informed of a director's obligations in this area, Woods J. stated (at para. 42) that "unless there is satisfactory evidence that a director sought advice as to his legal obligations as a director, ignorance is not sufficient to bring the director within the so-called due diligence defence."