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GST — director's liability (corporate lawyer)

My client was a corporate lawyer. In 1988, before the GST even existed, he became director of a corporation as a favour to a client (to balance the board). In 1991, the corporation stopped using his firm's services. When repeated requests made over several years to update their corporate records were ignored, the firm assumed that the company was no longer in business.

In 1998 Revenue Canada advised the lawyer that the company had recently gone bankrupt owing tens of thousands of dollars in unremitted GST. Revenue Canada intended to assess the lawyer, as a director of the company, for the amount of the GST. At this point the lawyer came to me for advice.

I wrote a letter to Revenue Canada, setting out in great detail, with extensive documentation, the reasons why the lawyer should not be liable (in essence, because he reasonably believed the corporation to be inactive and had no way of knowing that it owed GST). After some weeks' consideration, Revenue Canada agreed with my submission and withdrew its proposal to assess the lawyer.

Problem vanished!

(1998)