The general contracting company (“CIA”) of two brothers was dissolved in January of 2008 (the “Dissolution Date”) for failure to file Ontario corporate tax returns. Although “upon such dissolution, the property of CIA technically and legally escheated to the provincial Crown” (para. 40), in fact, a CIA bank account was thereafter used to pay various CIA creditors. In addition to being assessed under s. 160 on the basis of alleged property transfers to them after the Dissolution Date, they were treated as having received a deemed dividend under s. 84(2). However, this position was implicitly dropped by Crown counsel in closing argument, where no mention was made of it.
In indicating that s. 84(2) did not apply, Bocock J stated (at para 23):
Factually, CIA was dissolved involuntarily… . A winding-up transaction referenced in subsection 84(2) involves a more orderly and conceived transaction or series of transactions undertaken by the directors during winding-up, culminating in the final act of dissolution, reorganization or arrangement. This did not factually occur.