http://decision.tcc-cci.gc.ca/tcc-cci/decisions/en/item/71462/index.do 
Roitelman v. The Queen (May 7, 2014 – 2014 TCC 139) was a director’s liability appeal:
[1] The Appellant, Gerald Roitelman, is appealing a director’s liability assessment made pursuant to subsection 227.1(1) of the
Income Tax Act (the “Act”) in respect to the 2006 and 2007 taxation years.
[2] The Minister of National Revenue (the “Minister”) issued seven assessments to Roy’s Electric Company (the “Corporation”) for late-remitted or unremitted Federal and Provincial income taxes, employment insurance premiums and Canada Pension Plan contributions plus penalties and interest. On April 3, 2008, a certificate respecting this corporate debt, in the amount of $143,916.11, plus interest, was registered with the Federal Court of Canada.
Mr. Roitelman did not dispute the amounts involved. His defence was entirely based on due diligence. His evidence was that he had historically done the remittances himself but when he became involved in projects that took him away from the office frequently he hired and trained a bookkeeper [Ms. Shupena] to look after these tasks. He provided her with blank cheques so that she could make the necessary remittances when he was away from the office. His evidence was that when she failed to make the proper remittances he began to supervise her work as closely as he could:
[15] The Appellant testified that, after each occasion when be became aware of a notice of failure to remit, he would again oversee the bookkeeper’s work with more detail to ensure that future remittances would be made on time. As time passed and all deductions were again being remitted on time, the Appellant’s supervision would gradually diminish. Despite being aware of a number of failures to remit, the Appellant each time increased his supervision and review of her work until things stabilized. The Appellant testified that he continued to employ Shupena, despite these problems, because it allowed him to continue to work province-wide in the field. The Appellant recalled the receipt of two letters in May, 2007 and, after these letters, he stated that he lost confidence in Shupena’s work. After the September 13, 2007 personal notice to him, he stated that the bookkeeper was still responsible for the remittances but “[o]n a diminished level.” (Transcript, p. 34). After a period of time, he began to look for someone to replace her. Shupena eventually left her employment after a physical altercation with another employee at a Christmas office party in 2007. Following this, she made herself unavailable to the Appellant’s efforts to contact her concerning the problems.
After the bookkeeper left her employment he discovered a number of problems with her work:
[16] After the bookkeeper’s departure in late 2007, the Appellant discovered cheques and documents “hidden” in various locations in the corporate office. He found two remittance cheques that should have been forwarded to the Receiver General but, instead, were buried in an office desk and filing cabinet by the bookkeeper (see copies of these cheques, Exhibit A-1). These two cheques, totalling approximately $13,000, were signed and addressed to the Receiver General in 2007 but had never been forwarded. He described the location of these cheques as “tucked in under some items” and hidden from view (Transcript, p. 16). Provincial sales tax returns, that had been signed but not forwarded, were also found hidden in filing cabinets. According to the Appellant’s evidence, Shupena also attempted to delete financial records from the corporate computer prior to leaving her employment.
[17] The evidence before me suggests that the bookkeeper’s actions and the resulting errors were not simple oversights or mistakes. She acted fraudulently with an intention to deceive by not sending signed cheques and documentation to both federal and provincial tax authorities as the Appellant had instructed, by not bringing the failure notices to the attention of the Appellant and by attempting to erase sensitive financial information.
The court accepted that the appellant’s conduct met the statutory test for due diligence and allowed his appeal (but without costs):
[32] The Appellant could not reasonably have known or be expected to have known that the bookkeeper would engage in fraudulent and misleading actions. He did not have knowledge of this until after the relevant taxation years that are at issue in these appeals. The Appellant’s interaction with the bookkeeper should not be analyzed with the present benefit of hindsight but, rather, with a view to those circumstances as they existed during the relevant period. Therefore, I reject the Respondent’s submission that the Appellant acted imprudently and unreasonably by hiring the bookkeeper in the first place. In retrospect, hiring this bookkeeper was a poor business decision but it is not for this Court to make such an ex-post facto conclusion.
[33] In addition, the Appellant is not precluded from relying on the due diligence defence where there is no evidence to suggest that the Appellant condoned or encouraged the use of source remittances for other purposes. The Appellant instructed the bookkeeper in making timely appropriate remittances, supervised her work for a period initially, signed cheques and left them with her to forward to the Receiver General and, when he became aware of the problem, he again supervised her for a period to ensure remittances were being properly made. There is no evidence to suggest that the Appellant benefited or intended to benefit in any manner from the failure to remit, nor any evidence that implicates the Appellant in the withholding of the signed cheques, nor any evidence or suggestion that the cheques were not sent due to insufficient funds in the company account.
[34] In cross-examination, Respondent Counsel suggested to the Appellant that the Corporation had a history of non-compliance with remittances prior to hiring the bookkeeper. However, the Appellant submitted that his remittances were made on time. The evidence would support the Appellant’s testimony. In Exhibit R-1, at Tab 26, correspondence dated August 5, 2005, from the Minister to the Appellant, states that there were remittance problems in respect to the Corporation. This appears to be the first letter forwarded to the Corporation regarding the problem. That correspondence states that the Corporation had a “history of non-compliance”, which the Respondent, in cross-examination, was referencing. The corporate payroll account was established in November of 2004. The non-compliance referred to in that August 5, 2005 correspondence, therefore, occurred sometime between November, 2004 and August, 2005. The bookkeeper was hired in March, 2005. There was no other evidence, oral or documentary, concerning the timeline of the commencement of this history of non-compliance. There is no evidence to establish that the failure first occurred prior to March, 2005 when Shupena was hired. With no evidence before me, I reject the Respondent’s suggestion that the Appellant was not properly submitting corporate remittances during the period he attended to them personally prior to hiring the bookkeeper. The August, 2005 correspondence came approximately a half year subsequent to hiring her and did not reference non-compliance issues prior to March, 2005. Consequently, there is no evidence that would allow me to conclude that the Appellant had a history of non-compliance prior to hiring Shupena.
[35] The Appellant has met the burden of establishing that he took proactive steps to prevent the Corporation’s failure to remit and, therefore, he demonstrated the degree of care, diligence and skill required to prevent the failures that a reasonably prudent person would have exercised in comparable circumstances. Despite his actions, he was thwarted in his attempts to ensure compliance by the actions of the bookkeeper.
[36] For these reasons, the appeals for the 2006 and 2007 taxation years are allowed.