Canada v. Aujla

Canada v. Aujla
Court (s) Database
Federal Court of Appeal Decisions
Date
2008-10-14
Neutral citation
2008 FCA 304
File numbers
A-40-08, A-41-08
Notes
Reported Decision
Decision Content
Date: 20081014
Dockets: A-40-08
A-41-08
Citation: 2008 FCA 304
CORAM: DÉCARY J.A.
BLAIS J.A.
RYER J.A.
Docket A-40-08
BETWEEN:
HER MAJESTY THE QUEEN
Appellant
and
AMARJIT AUJLA
Respondent
Docket A-41-08
BETWEEN:
HER MAJESTY THE QUEEN
Appellant
and
HARJINDER AUJLA
Respondent
Heard at Vancouver, British Columbia, on September 18, 2008.
Judgment delivered at Ottawa, Ontario, on October 14, 2008.
REASONS FOR JUDGMENT BY: RYER J.A.
CONCURRED IN BY: DÉCARY J.A.
DISSENTING REASONS BY: BLAIS J.A.
Date: 20081014
Dockets: A-40-08
A-41-08
Citation: 2008 FCA 304
CORAM: DÉCARY J.A.
BLAIS J.A.
RYER J.A.
Docket A-40-08
BETWEEN:
HER MAJESTY THE QUEEN
Appellant
and
AMARJIT AUJLA
Respondent
Docket A-41-08
BETWEEN:
HER MAJESTY THE QUEEN
Appellant
and
HARJINDER AUJLA
Respondent
REASONS FOR JUDGMENT
RYER J.A.
[1] Two appeals (A-40-08 and A-41-08) were taken from a decision of Bowie J. (the “Tax Court Judge”) of the Tax Court of Canada (2007TCC764), dated December 21, 2007, allowing the appeals of Amarjit and Harjinder Aujla, which were heard on common evidence, against assessments issued to them, pursuant to subsection 323(1) of the Excise Tax Act, R.S.C. 1895, c. E-15 (the “ETA”), for the outstanding liability for goods and services tax (“GST”), interest and penalties of Aujla Construction Ltd. (the “Company”) at the time that it was struck from the register of companies under the Company Act, R.S.B.C. 1996, c. 62 (the “BCCA”), for failure to file annual reports.
[2] If a corporation fails to remit or pay certain amounts that are specified in subsection 323(1) of the ETA, that provision imposes a liability on the directors of the corporation, at the time of such failure, to pay the amounts (including interest on and penalties relating to those amounts) that should have been remitted or paid by the corporation. Subsection 323(4) of the ETA permits the Minister to assess the directors for the amount of the liability that has been imposed upon them under subsection 323(1) of the ETA. Subsection 323(5) of the ETA stipulates that an assessment pursuant to subsection 323(4) of the ETA cannot be made against a person more than two years after that person last ceased to be a director of the corporation.
[3] The issue in this appeal is whether the limitation period in subsection 323(5) of the ETA prevents the Minister from assessing the Aujla brothers for $162,331.92, pursuant to subsection 323(1) of the ETA, in respect of the failure of the Company to remit GST and related interest and penalties of a like or greater amount for reporting periods that ended prior to its dissolution, as provided for in section 257 of the BCCA, as a consequence of its failure to file annual reports.
RELEVANT STATUTORY PROVISIONS
[4] The relevant provision of the ETA is section 323. The relevant provisions of the BCCA are sections 1, 257, 262 and 263. These provisions are reproduced in Appendix A.
BACKGROUND
[5] The appeal in the Tax Court of Canada proceeded on an agreed statement of facts that is reproduced in the reasons of the Tax Court Judge. While the facts are non-contentious, it is useful to consider them briefly.
[6] The Minister assessed the Company for GST, interest and penalties in the amount of $197,995.75 on March 20, 1998. Approximately one year after the date of that assessment, the Company was dissolved on March 5, 1999, for failure to file annual reports, in accordance with section 257 of the BCCA.
[7] In an attempt to collect the amount owing, on February 20, 2003, the Minister applied to have the Company restored to the register, pursuant to subsection 262(1) of the BCCA.
[8] On February 20, 2003, approximately five years after the assessment against the Company, the British Columbia Supreme Court issued an order (the “Court Order”) that restored the Company to the register of companies under the BCCA for a two year period. The record contains no explanation for the Minister’s approximately five year delay in pursuing the collection of the amount owing by the Company.
[9] The Court Order reads as follows:
THIS COURT ORDERS that Aujla Construction Ltd. is restored to the Register of Companies for a period of not more than two (2) years, commencing on the date of the filing of a certified copy of this Order with the Registrar of Companies, for the purpose of enabling the Minister of National Revenue to facilitate the assessment and collection of the Goods and Services Tax debt owing by Aujla Construction Ltd. to the Receiver General for Canada.
THIS COURT FURTHER ORDERS that Aujla Construction Ltd. shall be deemed to have continued in existence as if its name had never been struck off the register and dissolved, without prejudice to the rights of any parties which may have been acquired prior to the date on which Aujla Construction Ltd. is restored to the Register of Companies.
[10] The Court Order led to the issuance of a Certificate of Restoration by the British Columbia Registrar of Companies, on March 6, 2003, that restored the Company to the register of companies under the BCCA for a two year period.
[11] After the restoration of the Company, the Minister commenced collection actions against the Aujla brothers by Third Party Notices of Assessment, dated September 4, 2003, on the basis of subsection 323(1) of the ETA, contending that they were vicariously liable for the amount that was assessed against the Company because they were directors of the Company at the time that the liability arose. That provision reads as follows:
323(1) If a corporation fails to remit an amount of net tax as required under subsection 228(2) or (2.3) or to pay an amount as required under section 230.1 that was paid to, or was applied to the liability of, the corporation as a net tax refund, the directors of the corporation at the time the corporation was required to remit or pay, as the case may be, the amount are jointly and severally, or solidarily, liable, together with the corporation, to pay the amount and any interest on, or penalties relating to, the amount.
323(1) Les administrateurs d’une personne morale au moment où elle était tenue de verser, comme l’exigent les paragraphes 228(2) ou (2.3), un montant de taxe nette ou, comme l’exige l’article 230.1, un montant au titre d’un remboursement de taxe nette qui lui a été payé ou qui a été déduit d’une somme dont elle est redevable, sont, en cas de défaut par la personne morale, solidairement tenus, avec cette dernière, de payer le montant ainsi que les intérêts et pénalités afférents.
[12] The Aujla brothers objected to these assessments on the basis that they had ceased to be directors of the Company as of the date of its dissolution on March , 1999, and the two year limitation period in subsection 323(5), which ended on March 4, 2001, precluded the assessments. That provision reads as follows:
323(5) An assessment under subsection (4) of any amount payable by a person who is a director of a corporation shall not be made more than two years after the person last ceased to be a director of the corporation.
323(5) L’établissement d’une telle cotisation pour un montant payable par un administrateur se prescrit par deux ans après qu’il a cessé pour la dernière fois d’être administrateur.
[13] The Minister justified the assessments on two bases. First, because the Company was dissolved as a consequence of its failure to file annual reports, and because they never formally resigned, the Aujla brothers never ceased to be directors. Secondly, because the Court Order had the effect of retroactively restoring the Company as if there had been no dissolution, the Court Order similarly must have retroactively reconstituted the directorship of the Aujla brothers. In either case, the Minister concluded that the two year limitation in subsection 323(5) was not engaged. As a result, the assessments were confirmed and the Aujla brothers appealed against them to the Tax Court of Canada.
THE DECISION OF THE TAX COURT OF CANADA
[14] The Tax Court Judge held that the Aujla brothers ceased to be directors of the Company when the dissolution occurred on March 5, 1999, because a dissolved company cannot have directors.
[15] The Tax Court Judge then considered the effect of the Court Order and concluded that it did not have the effect of retroactively reinstating the directorships of the Aujla brothers, as the Crown contended.
[16] The Tax Court Judge referred to subsections 262(1) and (2) and section 263 of the BCCA, which read as follows:
Restoration to register
262 (1) If a company has been dissolved, or the registration of an extraprovincial company has been cancelled under this Act or any former Companies Act, the court may, if it is satisfied that it is just that the company or extraprovincial company be restored to the register, not more than 10 years after the date of the dissolution or cancellation, on application by the liquidator, a member, a creditor of the company or extraprovincial company, or any other interested person, make an order, subject to the conditions and on the terms the court considers appropriate, restoring the company or extraprovincial company to the register.
(2) If a company or an extraprovincial company is restored to the register under subsection (1), the company is deemed to have continued in existence, or the registration of the extraprovincial company is deemed not to have been cancelled, and proceedings may be taken as might have been taken if the company had not been dissolved, or the registration of the extraprovincial company had not been cancelled.
Power of court
263 In an order made under section 262, the court may give directions and make provisions it considers appropriate for placing the company or extraprovincial company and every other person in the same position, as nearly as may be, as if the company had not been dissolved or the registration of the extraprovincial company cancelled, but, unless the court otherwise orders, the order is without prejudice to the rights of parties acquired before the date on which the company or extraprovincial company is restored to the register.
At paragraphs 13 and 14 of his reasons, the Tax Court Judge stated:
13 Subsection 262(1) permits the court to make an order restoring the company to the register "on the terms the court considers appropriate ...". "Section 263 empowers the court "to give directions and make provisions it considers appropriate for placing the company ... and every other person in the same position, as nearly as may be, as if the company had not been dissolved ..." [emphasis in original].
14 The effect of the order and the restoration of the company to the register, by the terms of subsection 262(2), is that the company is deemed to have continued in existence, and proceedings that might have been taken had there been no dissolution may be taken thereafter. Notably, the order of the court made no provision, as it might have done, to place the directors in the same position as if the company had not been dissolved. The words of the order add nothing to the effects that flow automatically by reason of the words of the Act from the simple fact of restoration.
[17] The Tax Court Judge observed that it did not appear that the Crown advised the British Columbia Supreme Court that the order that it was requesting would be used to assess the Aujla brothers, as a consequence of their having been directors at the time when the tax liability of the Company arose, as they were apparently not given notice of the application to restore the Company.
[18] The Tax Court Judge further commented upon subsection 262(1) and section 263 of the BCCA, stating in paragraph 16 of his reasons:
16 As important as the words of the statute and the order are, the words omitted from them are equally important. I am asked, in effect, to conclude that by necessary implication the deeming provision in subsection 262(2) not only deems the company to have been in existence when in fact it was not, but also deems the directors to have been directors when in fact they were not. There is, for good reason, a presumption against expanding by interpretation the scope of retrospective legislation: see Driedger on the Construction of Statutes, 3rd Ed., pp. 511-17 and the authorities there cited. In the present case, there is an additional reason not to extend the deeming provision beyond the company to the directors. The British Columbia legislature, by enacting section 263, has given to the court hearing the restoration application the discretionary power to decide whether "other persons" are to be retrospectively affected by the restoration order, or are to have the benefit of the "without prejudice" clause in that section. The absence of a provision in the order placing the directors in the position for which the respondent contends, and the inclusion of the without prejudice provision in it, both are indicative of an intent that the directors are not to be, in effect, deemed to have been directors throughout the period during which the company was struck off [emphasis added].
[19] Taking into consideration the fact that the British Columbia Supreme Court declined to exercise its discretion to include any “other persons” in the Court Order, as well as the principle supporting a narrow construction of retroactive legislation, the Tax Court Judge concluded that the Court Order did not, by implication, provide that the Aujla brothers were retroactively reconstituted as directors. As a result, he allowed the appeal.
ISSUES
[20] In the appeal, the Crown reiterated the arguments it made in the Tax Court of Canada in support of its contention that the limitation period in subsection 323(5) of the ETA was inapplicable in relation to the assessments that were issued to the Aujla brothers. First, the Crown contended that the Aujla brothers never ceased to be directors of the Company because they had not resigned from their positions as directors and the dissolution of the Company was the consequence of its having been struck off pursuant to section 257 of the BCCA. In the alternative, the Crown argued that if the Aujla brothers ceased to be directors of the Company by virtue of its dissolution, the Court Order, which restored the Company to the register and deemed it to have continued in existence, had the effect of reconstituting the directorships of the Aujla brothers as if the dissolution of the Company had never occurred and they had never ceased to be directors.
[21] The Crown added a third argument. It asserted that by finding that the Aujla brothers were not retroactively reconstituted as directors, the Tax Court Judge implicitly found that they were prospectively reconstituted as directors for the two year period that commenced on the date of the Court Order. It follows, according to the Crown, that the September 4, 2003 assessments against the Aujla brothers could not be resisted on the basis of the limitation period in subsection 323(5) of the ETA because, at the time of those assessments, the Aujla brothers actually held the office of directors of the Company, having been reconstituted as directors as of the date of the Court Order. In that regard, the Crown asserts that it is immaterial that the directorships of the Aujla brothers had been interrupted between March 5, 1999, the day of the dissolution of the Company, and March 6, 2003, the day of its restoration.
[22] The Aujla brothers disagree with the Crown’s contentions and add one of their own. They argue that even if the Court Order had the effect of reconstituting their directorships as of the date of the restoration of the Company, the “without prejudice” language in subsection 263 of the BCCA and the Court Order must be interpreted so as to preserve their right to assert the two year limitation period in subsection 323(5) of the ETA as a basis upon which to resist the assessments that were made against them.
ANALYSIS
Provincial Commercial Law Applies
[23] Both parties contend that the application of section 323 of the ETA is to be undertaken in light of the applicable provincial corporate law provisions, citing the decision of this Court in Kalef v. R., [1996] 2 C.T.C. 1 (F.C.A.). In that decision, McDonald J.A. agreed with the reasoning of MacKay J. in Perri (J.F.) v. M.N.R., [1995] 2 C.T.C. 196 (F.C.) to the effect that the principles that apply to the question of whether a directorship has been terminated are to be determined under the applicable provincial law and that the answer to that question may vary from province to province. Specifically, at page 5, McDonald J.A. stated:
I agree with the reasoning of MacKay J. While it may be open to Parliament to expressly deviate from the principles of corporate law for the purposes of the Income Tax Act, I do not think such an intention should be imputed.
[24] In my view, the provisions of the ETA do not provide any guidance with respect to whether the Aujla brothers ceased to be directors of the Company as a consequence of its dissolution on March 5, 1999, or if their directorships terminated on the dissolution, whether the Court Order had the effect of reconstituting those directorships, either retroactively or prospectively. These matters should be approached from the perspective of the applicable commercial law – in this case, the law of British Columbia.
[25] As recognized by the Courts in Perri and Kalef, the underlying commercial law may vary from province to province and, accordingly, its application may produce potentially different fiscal consequences in different provinces. For this reason, I am of the view that jurisprudence which interprets commercial law of jurisdictions other than British Columbia law is of limited relevance. Moreover, in the circumstances of this case, it is the BCCA – not successor or predecessor legislation – that must be considered. To that extent, caution must be exercised even when British Columbia legislation and jurisprudence are being considered.
Did the Aujla Brothers Ever Cease to be Directors of the Company?
[26] The Crown’s proposition that the Aujla brothers did not cease to be directors when the Company was dissolved on March 5, 1999, because the dissolution occurred involuntarily, pursuant to subsection 257(3) of the BCCA, cannot be accepted. No authority for that proposition was shown. Indeed, the authorities presented to this Court pointed in the opposite direction. See R. v. Gill (1989), 40 B.C.L.R. (2d) 360 at 367 (B.C.Co.Ct.); also see Shaw v. Hyde, [1921] 61 D.L.R. 666 at 670 (B.C.Co.Ct.).
Did the Court Order Retroactively Reconstitute the Directorships of the Aujla Brothers?
[27] The Crown’s next argument is that even if the dissolution of the Company caused the directorships of the Aujla brothers to cease on March 5, 1999, the Court Order had the effect of retroactively reconstituting those directorships such that, as a matter of law, those directorships never ceased. Consequently, according to the Crown, the two year limitation period in subsection 323(5) of the ETA never commenced and was, therefore, no bar to the assessments of the Aujla brothers on September 4, 2003, because they were directors of the Company on that date.
[28] The Aujla brothers contend that the alleged retroactive reconstitution of their directorships is unfair as it deprives them of the benefit of the limitation period that is provided for in subsection 323(5) of the ETA. They point out that the assessments were made against them approximately five years after the assessment was made against the Company and that the Minister has “slept on his rights”. They cite the decision of the Supreme Court of Canada in Markevich v. Canada, [2003] 1 S.C.R. 94 and, in particular, paragraphs 19 and 20 of the decision of Major J., which read as follows:
The appellant’s submission that the rationales for limitation periods militate against their application to tax collection cannot be correct. As noted above, limitation provisions are based upon what have been described as the certainty, evidentiary, and diligence rationales: see M. (K.), supra, at p. 29. The certainty rationale recognizes that, with the passage of time, an individual “should be secure in his reasonable expectation that he will not be held to account for ancient obligations”: M. (K.), supra, at p. 29. The evidentiary rationale recognizes the desire to preclude claims where the evidence used to support that claim has grown stale. The diligence rational encourages claimants “to act diligently and not ‘sleep on their rights’”: M. (K.), supra, at p. 30.
Each of the rationales submitted as applicable to there being no limitation periods affecting collection are in fact just the opposite and are directly applicable to the Minister’s collection of tax debts. If the Minister makes no effort to collect a tax debt for an extended period, at a certain point a taxpayer may reasonably come to expect that he or she will not be called to account for the liability, and may conduct his or her affairs in reliance on that expectation. As well, a limitation period encourages the Minister to act diligently in pursuing the collection of tax debts. In light of the significant effect that collection of tax debts has upon the financial security of Canadian citizens, it is contrary to the public interest for the department to sleep on its rights to enforce collection. It is evident that the rationales which justify the existence of limitation periods apply to the collection of tax debts.
[29] In my view, the contention of the Aujla brothers is not without merit, considering that the Crown has offered no explanation for its delay in attempting to collect the amounts owed by the Company and that the Crown apparently did not give notice to the Aujla brothers of the application to restore the Company, when it was clear to the Crown that the Aujla brothers could be affected by the restoration. However, I am of the view that these contentions are more relevant to the question of whether the ability of the Aujla brothers to rely on the limitation period in subsection 323(5) of the ETA is a substantive right that is to be maintained by virtue of the “without prejudice” language in section 263 of the BCCA and the Court Order.
[30] Thus, the question, at this point, is whether the Court Order had the effect of retroactively reconstituting the directorships of the Aujla brothers. In my view, this question turns on the interpretation of subsection 262(2) and section 263 of the BCCA. Those provisions bear repeating.
262 (2) If a company or an extraprovincial company is restored to the register under subsection (1), the company is deemed to have continued in existence, or the registration of the extraprovincial company is deemed not to have been cancelled, and proceedings may be taken as might have been taken if the company had been dissolved, or the registration of the extraprovincial company had not been cancelled.
263 In an order made under section 262, the court may give directions and make provisions it considers appropriate for placing the company or extraprovincial company and every other person in the same position, as nearly as may be, as if the company had not been dissolved or the registration of the extraprovincial company cancelled, but, unless the court otherwise orders, the order is without prejudice to the rights of parties acquired before the date on which the company or extraprovincial company is restored to the register.
[31] The Tax Court Judge concluded that the deeming provision in subsection 262(2) of the BCCA did not result in the retroactive reconstitution of the directorships of the Aujla brothers. He found that the power to bring about that result existed in section 263 of the BCCA but that the British Columbia Supreme Court did not exercise that power in making the Court Order, since that order contained no reference to any such reconstitution and it was unacceptable to find such a reconstitution by implication.
[32] The Tax Court Judge observed that the Crown’s contention that the directorship of the Aujla brothers should be regarded as having been implicitly reconstituted is inconsistent with the fact that they were given no notice of the Crown’s application to restore the Company. He further supported his conclusion by reference to the general presumption against expanding, by interpretation, the scope of retroactive legislation, citing Ruth Sullivan, Driedger on the Construction of Statutes, 3rd ed. (Toronto: Butterworths, 1994) at 511-517.
[33] In my view, the Tax Court Judge was correct in his conclusion that the retroactive reconstitution of the Aujla brothers could only have arisen out of express language to that effect in the Court Order.
[34] In addition to the reasons that were put forward by the Tax Court Judge, I find support for his conclusion in the decision of the British Columbia Court of Appeal in Natural Nectar Prod. Can. Ltd. v. Theodor, [1990] 5 W.W.R. 590. In that case, the British Columbia Court of Appeal interpreted subsection 286(2) and section 287 of the Company Act, R.S.B.C. 1979, c. 59 (the “Former BCCA”). Subsection 286(2) of the Former BCCA is substantially similar to subsection 262(2) of the BCCA and section 287 of the Former BCCA is identical to section 263 of the BCCA.
[35] The central issue in that case was whether the deeming provision in subsection 286(2) of the Former BCCA had the effect of retroactively restoring the corporate existence of the company in question, as was contended by the respondent. Since this is a decision of the highest court in British Columbia that bears directly upon the issue that is before this Court in the present appeal, it is worthwhile to reproduce the relevant portion of the decision. In particular, at pages 594 and 595, Hinkson J.A. stated:
In the present case, the order made restoring the company to the Register of Companies on 27th February 1989 provided:
THIS COURT ORDERS that Natural Nectar Products Canada Ltd. be and the same is hereby restored to the Registrar of Companies commencing on the date of the filing of a certified copy of this Order with the Registrar of Companies and that the said company shall be deemed to have continued in existence, without prejudice, however, to the rights of any parties which may have been acquired prior to the date on which the Company is restored to the Register.
In drawing the form of order counsel for the respondent inserted the words after, “... continued in existence” the words “as if its name had never been struck off” but the judge did not include those words in the order made by him. In my opinion, it was open to him to do so if he considered it appropriate in the circumstances. He would then have been exercising a power conferred by s. 287. But he did not do so.
Counsel for the respondent relied upon the deeming provision in s. 286 and contended that legislation containing deeming clauses has been determined to have retrospective effect in the following cases: A.G.B.C. v. Royal Bank of Can., [1937] S.C.R. 459, [1937] 3 D.L.R. 393; Culchoe Nu Lodge (1980) Ltd. v. Cando Contr. Ltd. (1986), 73 A.R. 342 (M.C.); Montreal Trust Co. v. Boy Scouts of Can. (Edmonton Region) Foundation, [1978] 5 W.W.R. 123, 3 E.T.R. 1, 88 D.L.R. (3d) 99 (B.C.S.C.); Home Mtge. Ltd. v. Robertson, [1988] 4 W.W.R. 260, 68 Sask. R. 274 (Q.B.); and Zangelo Invt. Ltd. v. Glasford State Inc. (1987), 59 O.R. (2d) 510, 38 D.L.R. (4th) 395; affirmed 63 O.R. (2d) 510, 49 D.L.R. (4th) 320 (C.A.).
Each of those cases dealt with statutory sections which differ from the present provisions of ss. 286 and 287 of the Company Act.
In my opinion, the deeming provision in s. 286 was inserted in the section to overcome the problems that would otherwise arise when a company was struck from the register and subsequently restored to the register. As Jenkins, L.J. observed in the Tymans case at p. 622:
Otherwise obvious difficulties as to incorporation, membership, share capital, and so forth would arise, and if the resuscitated company was brought into being as a legal entity distinct from the dissolved one, claims by and against the resuscitated company in respect of the pre-dissolution dealings of the dissolved company would not be maintainable.
The purpose in inserting the deeming provision was to avoid those problems and to avoid any suggestion that the company had not been revived by being restored to the register.
Upon the basis of that reasoning, however, I do not conclude that s. 286 should be given retrospective operation. Rather, such an effect can be given to the order restoring the company to the register if the court gives appropriate directions under s. 287 for placing the company "in the same position, as nearly as may be, as if the company had not been dissolved . . .”
In my opinion, that would have been the effect of the order restoring the company to the register if the words "as if its name had never been struck off" had been contained in the order.
Construing the order as it was entered, in my opinion, it does not have the effect of placing the company in the same position, as nearly as may be, as if the company had not been dissolved.
[Emphasis added.]
[36] In my view, this passage makes it clear that the deeming provision in subsection 286(2) of the Former BCCA, and therefore subsection 262(2) of the BCCA, does not have the effect of retroactively reconstituting the corporate existence of a company that has been restored. Instead, that result can only be brought about by the inclusion in the order of express language to that effect, in accordance with the exercise of the power contained in section 287 of the Former BCCA, or subsequently, section 263 of the BCCA. Thus, a restoration order that does not contain the requisite language will have the effect of restoring the company in question on a prospective and not a retroactive basis.
[37] In applying the rationale in Natural Nectar to the issue at hand, it is my view that section 263 of the BCCA empowers the British Columbia Supreme Court to order the retroactive reconstitution of directorships that were in place at the time of the dissolution of the company in question, since each person who was then a director would fall within the meaning of the phrase “other person” in section 263 of the BCCA. However, I am also of the view that since explicit language in a restoration order is necessary to bring about a retroactive restoration of a company, exercising a power granted under section 263 of the BCCA (as was the conclusion of the Court in Natural Nectar), it must follow that the retroactive reconstitution of the directorships that existed at the date of the dissolution of the company in question equally requires the inclusion of explicit language to that effect in the restoration order, in the exercise of the power granted under that statutory provision.
[38] In the circumstances under consideration, the Court Order deemed the Company to have continued in existence “as if its name had never been struck off”. In my view, this language evidences the specific exercise of the power granted to the British Columbia Supreme Court under section 263 of the BCCA to retroactively restore the corporate existence of the Company. However, the Court Order contains no mention whatsoever of the reconstitution of the directorships of the Aujla brothers, retroactively or otherwise, as it surely could have. Accordingly, I am of the view that the Court Order had no such effect and the Aujla brothers were not reconstituted as directors of the Company by virtue of the Court Order.
[39] I wish to reiterate that this conclusion is based upon the particular provisions of the BCCA that were in force at the time of the assessments against the Aujla brothers, as such provisions have been interpreted in the relevant jurisprudence. It is clear that British Columbia corporate law has evolved over time. See A.-G. B.C. v. Royal Bk. et al., [1937] 3 D.L.R. 393 (S.C.C.), in which the Court considered the restoration of a company that had been struck off the register pursuant to the Companies Act, R.S.B.C., 1924, c. 38. Under the applicable provisions of that legislation, the restoration had retroactive effect that did not depend upon the exercise of judicial discretion. This is in marked contrast to the corresponding provisions of the Former BCCA, as interpreted in Natural Nectar, and the BCCA that are under consideration in this appeal. Thus, it may be observed that even within the same province, the relevant corporate legislation may change over time, with the result that the fiscal consequences of similar transactions or events may differ depending upon the specific provisions of such corporate legislation at the time that such transactions or events take place.
[40] I would add that the retroactively reconstituted existence of the Company without the retroactive reconstitution of the directorships that were in place at the time of its dissolution, might appear to be problematic in that without directors the Company would seemingly be unable to function. In the circumstances under consideration, this potential concern does not arise since the record does not contain any indication that the Company undertook or desired to undertake any activities after the date of its dissolution on March 5, 1999. If the shareholders of the Company had considered it to be useful for the Company to have undertaken any activity after its restoration, they could have passed a resolution under which directors could have been elected. I would hasten to add that this is not a case in which any person who held the office of director prior to the dissolution of a company, pursuant to subsection 257(3) of the BCCA, continued to act as if the directorship of that person had persisted in spite of such dissolution. In those circumstances, I would observe that the definition of director in section 1 of the BCCA includes “every person, by whatever name designated, who performs functions of a director”. Thus, if such a company were retroactively reconstituted and a person who was a director immediately before the dissolution continued to perform functions of a director of that company in the period after the dissolution, that person’s actions might well be sufficient to bring that person within the definition of director in section 1 of the BCCA. In the circumstances of this case, these considerations are academic since there is no indication that the Aujla brothers undertook any actions after March 5, 1999, that could bring them within the definition of director in section 1 of the BCCA or that any action by or on behalf of the Company occurred or was contemplated.
Did the Court Order Prospectively Reconstitute the Directorships of the Aujla Brothers?
[41] With respect to the Crown’s final argument that the Tax Court Judge implicitly found that the Aujla brothers were reconstituted as directors of the Company as of the date of the Court Order, in my view, the Tax Court Judge made no such finding. Accordingly, that argument cannot be accepted.
Conclusion
[42] In summary, I conclude that the Aujla brothers ceased to be directors of the Company on March 5, 1999, the date of its dissolution, and were not reconstituted as directors by the Court Order (retroactively or otherwise). As such, it follows that they are entitled to resist the assessments made against them on September 4, 2003, since those assessments were made after the limitation period provided for in subsection 323(5) of the ETA, which expired in March of 2001. It also follows that it is unnecessary for me to consider the effect of the “without prejudice” language in section 263 of the BCCA and the Court Order.
DISPOSITION
[43] For the foregoing reasons, I would dismiss the appeals with one set of costs. I would also direct that a copy of these reasons should be placed in each of Court files A-40-08 and A-41-08.
“C. Michael Ryer”
J.A.
“I agree.
Robert Décary J.A.”
BLAIS J.A. (Dissenting Reasons)
INTRODUCTION
[44] This is an appeal from 2007TCC764, a judgment rendered by Justice Bowie of the Tax Court of Canada dated December 21, 2007.
[45] Generally at issue is whether Amarjit Aujla and Harjinder Aujla (Aujla brothers) can be held personally liable, as directors of the recently restored Aujla Construction Ltd. (the Company), for taxes in the amount of $197,995.75 owed under the Excise Tax Act.
[46] Specifically at issue is whether the Aujla brothers can be imputed with personal obligations as directors despite the absence of any mention of the Aujla brothers in the February 2003 order issued by the British Columbia Supreme Court (the Court Order) that restored the Company.
[47] I will rely on the facts as presented by the Tax Court judge and my colleague in lieu of reproducing them here.
[48] I have had the benefit of reading the reasons prepared by my colleague and respectfully disagree.
ANALYSIS
[49] The determination of any obligations potentially owed by the Aujla brothers is premised on the Court Order, the federal Excise Tax Act, and the Company Act of British Columbia.
[50] The Court Order reads as follows:
THIS COURT ORDERS that the Company is restored to the Register of Companies for a period of not more than two (2) years, commencing on the date of the filing of a certified copy of this Order with the Registrar of Companies, for the purpose of enabling the Minister of National Revenue to facilitate the assessment and collection of the Goods and Services Tax debt owing by the Company to the Receiver General of Canada.
THIS COURT FURTHER ORDERS that the Company shall be deemed to have continued in existence as if its name had never been struck off the register and dissolved, without prejudice to the rights of any parties which may have been acquired prior to the date on which the Company is restored to the Register of Companies.
[51] The power to restore a company through a court order is found in provisions 262 and 263 of the British Columbia Company Act, R.S.B.C. 1996 c. 62:
262 (1) If a company has been dissolved, or the registration of an extraprovincial company has been cancelled under this Act or any former Companies Act, the court may, if it is satisfied that it is just that the company or extraprovincial company be restored to the register, not more than 10 years after the date of the dissolution or cancellation, on application by the liquidator, a member, a creditor of the company or extraprovincial company, or any other interested person, make an order, subject to the conditions and on the terms the court considers appropriate, restoring the company or extraprovincial company to the register.
(2) If a company or an extraprovincial company is restored to the register under subsection (1), the company is deemed to have continued in existence, or the registration of the extraprovincial company is deemed not to have been cancelled, and proceedings may be taken as might have been taken if the company had not been dissolved, or the registration of the extraprovincial company had not been cancelled.
(3) The court may make an order under subsection (1) restoring a company or an extraprovincial company to the register for a limited period, and, after the expiration of that period, the company must promptly be struck off the register, or, in the case of an extraprovincial company, its registration cancelled, by the registrar. […]
and
263 In an order made under section 262, the court may give directions and make provisions it considers appropriate for placing the company or extraprovincial company and every other person in the same position, as nearly as may be, as if the company had not been dissolved or the registration of the extraprovincial company cancelled, but, unless the court