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PST — director's liability

My client was a corporate lawyer. In 1988, 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 the Ontario Ministry of Finance Retail Sales Tax Branch advised the lawyer that the company had recently gone bankrupt owing over $135,000 of unremitted PST. The Ministry intended to assess the lawyer, as a director of the company, for the amount of the PST. At this point the lawyer came to me for advice.

I wrote a letter to the Ministry, 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 PST). I pointed out that I had already gotten Revenue Canada to agree to drop a similar proposed assessment relating to GST. After reviewing the file for 14 months, the Ministry agreed with my submission and withdrew its proposal to assess the lawyer.

Problem vanished!

(1999)