Danso-Coffey v. Her Majesty the Queen in Right of Ontario

Danso-Coffey v. Her Majesty the Queen in Right of Ontario [Indexed as: Danso-Coffey v. Ontario]

99 O.R. (3d) 401

Court of Appeal for Ontario,

Weiler, Juriansz and Epstein JJ.A.

March 9, 2010

Taxation -- Retail sales tax -- Minister assessing respondent as director of her brother's company for retail sales tax unremitted by company -- Respondent not a director of company -- Respondent missing time limits within which to object to Minister's assessment under Retail Sales Tax Act -- Respondent bringing application pursuant to rule 14.05(3)(d) of Rules of Civil Procedure for declaration that she was not director of company and was not liable for retail sales tax owed by company -- Section 29.1 of Retail Sales Tax (prohibiting any person other than Minister from bringing application under rule 14.05(3) in respect of any matter arising under Act) coming into force before respondent brought application -- Application judge erring in granting application -- Section 29.1 applying to application -- Respondent not properly before court -- Declaration that respondent was not liable for retail sales tax being set aside -- Retail Sales Tax Act, R.S.O. 1990, c. R.31, s. 29.1 -- Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rule 14.05(3).

In May 2006, the Minister assessed the respondent pursuant to s. 43 of the Retail Sales Tax Act for unremitted retail sales tax on the basis that she was a director of a company owned by her brother. Section 43(3) of the Act recognizes a "due diligence" defence. However, the respondent was never a director of the corporation. She was unaware that her brother had named her as a director, had never given her consent in writing and had removed her registration as director in September 2004. Through no fault of her own, she missed the time limits within which to contest liability within the framework of the Act. Instead, she sought and obtained a declaration under rule 14.05(3)(d) of the Rules of Civil Procedure that she was not a director of the company and was not liable for retail sales tax owed by the company. The application was brought in 2008. In December 2006, s. 29.1 of the Act (prohibiting any person other than the Minister from bringing an application under rule 14.05(3) in respect of any matter arising under the Act) came into force. The Minister appealed.

Held, the appeal should be allowed.

Per Weiler J.A.: The application judge erred in holding that the assessment was unlawful. He also erred in finding that there was a "functional gap" in the Act as the Act did not provide for the defence that the respondent did not have the status of director. The respondent could have raised the defence that she was never a director as a due diligence defence under s. 43(3). It was unnecessary to decide whether s. 29.1 of the Act applied to the application, as the appeal should be allowed even if it did not apply. There was no jurisprudential reason for the court to exercise its inherent jurisdiction to grant a declaration that the respondent was not liable for retail sales tax. The declaration that the respondent was never a director of her brother's company should be upheld.

Per Juriansz J.A. (Epstein J.A. concurring): Section 29.1 applied to the respondent's application. There was no issue about the retrospective application of s. 29.1 in the circumstances. The fact that the respondent sought a declaration [page402] regarding tax liability that arose before s. 29.1 came into effect did not make its application retroactive. The application was brought more than a year after s. 29.1 came into force. The application judge erred by not finding that the respondent was not properly before the court.

APPEAL from the judgment of Hackland R.S.J., 2009 4852 (ON SC), [2009] O.J. No. 530, 55 B.L.R. (4th) 145 (S.C.J.) granting an application for a declaration that the respondent was not liable for unremitted retail sales tax.

Cases referred to Aim Funds Management Inc. v. Aim Trimark Corporate Class Inc., [2009] O.J. No. 4798, [2009] G.S.T.C. 170, 2010 G.T.C. 1002, 64 B.L.R. (4th) 261 (S.C.J.); Canada v. Addison & Leyen Ltd., [2007] 2 S.C.R. 793, [2007] S.C.J. No. 33, 2007 SCC 33, 284 D.L.R. (4th) 385, 365 N.R. 62, J.E. 2007-1375, 2007 D.T.C. 5365, 65 Admin. L.R. (4th) 1, [2008] 2 C.T.C. 129, 158 A.C.W.S. (3d) 1022, EYB 2007-121919, revg [2006] F.C.J. No. 489, 2006 FCA 107, [2006] 4 F.C.R. 532, 265 D.L.R. (4th) 253, 346 N.R. 238, [2006] 3 C.T.C. 95, 2006 D.T.C. 6248, 147 A.C.W.S. (3d) 328; Canada Trustco Mortgage Co. v. Canada, [2005] 2 S.C.R. 601, [2005] S.C.J. No. 56, 2005 SCC 54, 259 D.L.R. (4th) 193, 340 N.R. 1, J.E. 2005-1901, [2005] 5 C.T.C. 215, 2005 D.T.C. 5523, 2005 D.T.C. 5547, 142 A.C.W.S. (3d) 1075, EYB 2005-96529; Di Battista v. 874687 Ontario Inc. (2005), 2005 51220 (ON SC), 80 O.R. (3d) 136, [2005] O.J. No. 5897, [2006] 5 C.T.C. 152, 146 A.C.W.S. (3d) 467 (S.C.J.); Flatly v. Algy Corp. (c.o.b. Mazzrow's), 2000 22783 (ON SC), [2000] O.J. No. 3787, 9 B.L.R. (3d) 255, 100 A.C.W.S. (3d) 411 (S.C.J.); Hay v. Canada, [2004] T.C.J. No. 29, 2004 TCC 51, [2004] G.S.T.C. 3, 2004 G.T.C. 138; R. v. London Excavators & Trucking Ltd. (1998), 1998 3479 (ON CA), 40 O.R. (3d) 32, [1998] O.J. No. 6437, 110 O.A.C. 94, 125 C.C.C. (3d) 83, 38 W.C.B. (2d) 328 (C.A.); Scion Capital, LLC v. Gold Fields Ltd., 2006 3286 (ON SC), [2006] O.J. No. 466, [2006] O.T.C. 114, 15 B.L.R. (4th) 331, 145 A.C.W.S. (3d) 943 (S.C.J.); Stubart Investments Ltd. v. Canada, [1984] 1 S.C.R. 536, [1984] S.C.J. No. 25, 84 D.T.C. 6305, 10 D.L.R. (4th) 1, 53 N.R. 241, [1984] C.T.C. 294, 1984 20, 26 A.C.W.S. (2d) 53; Toronto (City) v. Olympia Edward Recreation Club Ltd., 1953 138 (ON CA), [1954] O.R. 14, [1953] O.J. No. 710, [1954] 1 D.L.R. 368 (C.A.) Statutes referred to Business Corporations Act, R.S.O. 1990, c. B.16, ss. 119(9), (10), 248 [as am.], 250, (1), 262(3) Corporations Information Act, R.S.O. 1990, c. C.39, ss. 2(1) [as am.], 19 [as am.], 20, 21 [as am.] Courts of Justice Act, R.S.O. 1990, c. C.43, s. 97 [as am.] Excise Tax Act, R.S.C. 1985, c. E-15, s. 323(1) [as am.] Retail Sales Tax Act, R.S.O. 1990, c. R.31, ss. 9(1), 18-27 [as am.], 29.1, 18(3), (7), (8), 25(5), (5), 43 [as am.], (1), (3), (4), (5) Rules and regulations referred to R.R.O. 1990, Reg. 182, (Corporations Information Act), s. 1.1 [as am.] Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rules 14.05(2), (3), (d), 25

Anita Veiga, for appellant. Heather Williams, for respondent.

WEILER J.A.: -- [page403]

Introduction

[1] On May 15, 2006, the appellant, hereinafter referred to as the Minister, assessed the respondent, Ms. Danso-Coffey, $64,020 for unremitted retail sales tax on the basis that she was a director of Danso Enterprises Ltd. Danso Enterprises was a company owned and incorporated by her brother that had failed to remit the tax and which had made an assignment in bankruptcy.

[2] The assessment was made pursuant to s. 43 of the Retail Sales Tax Act, R.S.O. 1990, c. R.31 ("RSTA"). Section 43 provides that when a bankrupt corporation has failed to remit tax, the directors of the corporation are jointly and severally liable with the corporation to pay the tax. [See Note 1 below] The section empowers the Minister to assess any person "for any amount payable by the person under this section" and states that the sections of the RSTA respecting assessments, objections and appeals apply with such modifications as required. Subsection 43(3) recognizes a "due diligence" defence, in that liability is not imposed "if the director exercised the degree of care, diligence and skill to prevent the failure [to remit tax] that a reasonably prudent person would have exercised in comparable circumstances".

[3] Ms. Danso-Coffey was never a director of the corporation and had no involvement with the company. Regrettably, through no fault of her own, she did not contest liability within the framework of the RSTA. She did, however, seek and obtain a declaration under s. 97 of the Courts of Justice Act, R.S.O. 1990, c. C.43, [page404] and rule 14.05(3) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, that

[Ms. Danso-Coffey] was never a director of Danso Enterprises Ltd. and [that she] is accordingly not liable for the section 43 Retail Sales Tax Act director's liability assessment dated May 15, 2008.

[4] In appealing this decision, the Minister submits that disputes respecting an assessment under the RSTA must be resolved through the process established within the Act, not by applications in the courts. Although the Minister now concedes that a Superior Court's inherent jurisdiction to grant discretionary relief is not ousted by the objection and appeal scheme contained in ss. 18-27 of the RSTA, it submits that that jurisdiction must be exercised exceptionally. The Minister further submits that nothing in this case warranted the exercise of the court's inherent jurisdiction. The Minister submits Ms. Danso-Coffey could have raised the defence that she was not a director if she had filed a Notice of Objection to the assessment within the time limits prescribed in the Act. Finally, the Minister submits that s. 29.1 of the RSTA, an amendment which came into force in December 2006, prevented Ms. Danso-Coffey from bringing her rule 14.05(3) application in the first place.

[5] Prior to the coming into force of s. 29.1 of the RSTA, a person had the right to bring an application, pursuant to rule 14.05(3)(d) of the Rules of Civil Procedure, for "the determination of rights that depend on the interpretation of a . . . statute". Section 29.1(5) states that "[n]o person other than the Minister may bring an application under subrule 14.05(3) of the Rules of Civil Procedure on or after the day this section comes into force, in respect of any matter arising under this Act". Persons other than the Minister can now bring an application only pursuant to rule 14.05(2) that states, "[a] proceeding may be commenced by an application to the Superior Court of Justice or to a judge of that court, if a statute so authorizes".

[6] The Minister concedes that s. 29.1 is substantive in nature. However, the Minister submits that as Ms. Danso- Coffey's application was brought after the date s. 29.1 came into force, she was not entitled to bring the application. In taking this position, the Minister submits it is not seeking to apply the amendment retrospectively.

Chronology of Events

[7] Before turning to the law, it is of assistance to review, in table form, the chronology of events. [page405]

[QL:GRAPHIC NAME="99OR3d401-1.jpg"/]

The Decision of the Application Judge

[8] The application judge's decision dealt with three issues.

[9] The first issue was whether Ms. Danso-Coffey was ever a director of the company. The application judge held that she had never been a director. He observed that the uncontradicted evidence was Ms. Danso-Coffey had been named a director of her brother's company without her knowledge. Shares of the company were placed in her name but she never received them. She did not sign any of the incorporation documents including the consent to act as director required by s. 119(9) of the Ontario Business Corporations Act, R.S.O. 1990, c. B.16 ("OBCA"). That subsection and subsection (10) provide:

119(9) Subject to subsection (10), the election or appointment of a director under this Act is not effective unless the person elected or appointed consents in writing before or within 10 days after the date of the election or appointment.

(10) If the person elected or appointed consents in writing after the time period mentioned in subsection (9), the election or appointment is valid.

[10] The OBCA makes clear that a person's consent is required in order for the appointment of the person as a director to be valid. Ms. Danso-Coffey was unaware that her brother had named her as a director of his corporation and never gave her consent in writing. She was not a director in law. Nor was she a de facto director. She was never employed by the company. She "had no operational involvement in the business at any time, nor did she ever receive any income or benefits from the company". When she learned she had been named as a director and shareholder of the company, she retained a solicitor to determine if she could be personally liable for the debts of the company. On her lawyer's advice, Ms. Danso-Coffey filed a Notice of Change form with the Minister of Commercial Affairs, removing her registration as a director of the company. The application judge concluded [at para. 22] that Ms. Danso-Coffey was a complete stranger to the business, her only connection being her family relationship with her brother. "In these unusual circumstances", he wrote, "it must follow that the applicant cannot be lawfully assessed as a director under section 43 of the RSTA". [page408]

[11] The second issue addressed by the application judge was whether Ms. Danso-Coffey was able to contest the s. 43 director's liability assessment through the objection provisions of the RSTA. The application judge held that the statutory scheme in the RSTA did not contemplate the defence that the applicant did not have the status of director; she had no defences other than the due diligence defence in s. 43(3). There was, in effect, a "functional gap" in the RSTA.

[12] The application judge held that there was nothing in the RSTA at the material times to prevent the court from exercising its inherent and statutory jurisdiction to grant declaratory relief to Ms. Danso-Coffey. He explicitly rejected [at para. 26] the Minister's submission that the RSTA is a complete code: "[A]t the time of this assessment, the RSTA was not, in my opinion, a sufficiently comprehensive or exclusive scheme as to oust this court's jurisdiction to grant declaratory relief."

[13] The third issue was whether the court retained the discretion to grant the desired remedy in the light of s. 29.1(5), a new amendment to the RSTA limiting the ability of taxpayers to bring applications for declaratory relief. Section 29.1(5) reads as follows:

29.1(5) No person other than the Minister may bring an application under subrule 14.05(3) of the Rules of Civil Procedure on or after the day this section comes into force, in respect of any matter arising under this Act.

The amendment came into force on December 20, 2006, and Ms. Danso-Coffey brought her application on February 6, 2008.

[14] The application judge held that the effect of s. 29.1 on taxpayers' rights was substantive and, as such, ought not to be given retroactive effect. He concluded [at para. 24] that, at the material time, there was nothing in the RSTA ". . . to prevent this court from exercising its inherent and statutory jurisdiction to grant declaratory relief to the applicant" and that it would be manifestly unfair not to do so.

Issues

[15] The issues forming the basis of this appeal can be identified as follows: (i) Was the Minister's assessment of the taxpayer "unlawful"? (ii) Was there a functional gap in the RSTA such that Ms. Danso-Coffey could not have sought relief within the parameters of the RSTA? [page409] (iii) If there was no functional gap, did the application judge err in holding that he had jurisdiction to grant declaratory relief? (iv) If the application judge had jurisdiction to grant declaratory relief, did he err in exercising that jurisdiction?

Analysis

(i) Was the assessment unlawful?

[16] In making its assessment, the Minister says it was entitled to rely, and did rely, on the returns filed under the Corporations Information Act, R.S.O. 1990, c. C.39 ("CIA") and the presumption of accuracy it contained. [See Note 2 below]

[17] The Minister knew that the CIA certificate was only based on the unconfirmed information in a CIA return and had reliable information from Ms. Danso-Coffey's lawyer that a basic precondition to the imposition of liability under s. 43 had not been fulfilled at the time it chose to issue the Notice of Assessment. However, despite the information rebutting the presumption of accuracy, the Minister issued a Notice of Assessment. The Minister was not bound by the information provided by Ms. Danso-Coffey. The relevant portion of s. 18(7) of the RSTA reads:

18(7) The Minister is not bound by . . . information delivered by or on behalf of any person under this Act and may, despite . . . information so delivered, . . . assess the tax payable under this Act.

[18] Although the Minister was not bound by the information provided by Ms. Danso-Coffey, the Minister's discretion to issue an assessment, like all administrative discretion, must be exercised reasonably, not arbitrarily or capriciously. In this appeal, Ms. Danso-Coffey does not allege that the Minister abused its power or that her objection was not taken into account. Rather, it appears that the Minister was under the impression that in law Ms. Danso-Coffey could not raise the defence that she had never been a director. Accordingly, it issued a Notice of Assessment. The trial judge erred in holding that the assessment was unlawful. [page410]

(ii) Was there a "functional gap" in the [RSTA](https://www.canlii.org/en/on/laws/stat/rso-1990-c-r31/latest/rso-1990-c-r31.html)?

[19] The letter sent by the Minister on April 19, 2006 stated that Ms. Danso-Coffey did not meet the standard of care necessary to be exempted from liability under the "due diligence provisions" of the Act. It implied that she had not taken all reasonable steps to avoid liability. Before the application judge, the Minister submitted that, despite the position taken in its April 19, 2006 letter, Ms. Danso-Coffey could have raised the defence that she was never a director under the Act.

[20] The essence of the application judge's decision as to whether Ms. Danso-Coffey could raise the defence that she had never been a director under the RSTA is as follows [at paras. 10 and 22]:

Section 43 of the RSTA imposes a joint and several liability on directors of a company for uncollected or unremitted retail sales tax, but this obligation is clearly dependent on the individual having the status of director at the material times. A non-director has no obligations under the section. Furthermore, section 43(3) places on the director a duty to exercise a "degree of care, diligence and skill" to prevent the failure to collect and remit taxes. It would therefore make no sense to require a non-director to establish the statutory due diligence defence because a non- director has no obligation of due diligence under the RSTA. . . . . .

The comprehensive statutory scheme in the RSTA does not contemplate the defence that the applicant did not, in fact, have the status of director. The statutory scheme in sections 24 and 25 of the RSTA does not countenance the defence that I have found to be factually established before this court that she was never a director. In these unusual circumstances, it must follow that the applicant cannot be lawfully assessed as a director under section 43 of the RSTA nor can she be said to have any due diligence obligation under section 43(3) of the Act.

[21] The application judge rejected the submission that Ms. Danso-Coffey could have raised the defence under the provisions of the RSTA had she done so in a timely manner. In his opinion, the RSTA did not "countenance" her defence.

[22] In support of its position that there is no functional gap in the legislation, the Minister relies on Hay v. Canada, 2004 TCC 51, [2004] T.C.J. No. 29, [2004] TCC 51 as precedent for this kind of defence. Hay concerned a decision involving s. 323(1) of the Excise Tax Act, R.S.C. 1985, c. E-15, a provision virtually identical to s. 43 of the RSTA. In that case, Hay successfully appealed from his assessment for tax as a director, through the prescribed statutory objection mechanism, on the basis that he had never agreed to act in the capacity of a director. The Tax Appeal Court held that as one of the conditions required for the application of s. 323(1) had not been met, the assessment should be vacated. [page411]

[23] In R. v. London Excavators & Trucking Ltd. (1998), 1998 3479 (ON CA), 40 O.R. (3d) 32, [1998] O.J. No. 6437, 125 C.C.C. (3d) 83 (C.A.), Catzman J.A. explained [at para. 10], "[T]he defence of due diligence may take one of two forms: (1) holding a reasonable belief in a mistaken set of facts, and (2) taking all reasonable steps to avoid the offending event." Here, although Ms. Danso-Coffey reasonably believed that she was not listed as a director of her brother's company, she was mistaken. This would satisfy the first branch of the due diligence defence.

[24] Accordingly, the application judge erred in concluding that there was a "functional gap" in the RSTA. Ms. Danso-Coffey had a due diligence defence in the sense that she had a reasonable belief in a mistaken set of facts. She could have raised the defence that she was never a director under s. 43(3) as a defence to an assessment under the RSTA.

(iii) Did the application judge err in holding that he had jurisdiction to grant declaratory relief?

[25] The application judge's declaration that Ms. Danso- Coffey did not owe any retail sales tax was premised on his conclusion that s. 29.1 of the RSTA did not apply to this case. I find it unnecessary to examine that conclusion because I would allow this appeal even if s. 29.1 did not apply.

(iv) Did the application judge err in exercising his jurisdiction?

(a) The declaration that retail sales tax was not owing

[26] The Minister appears to rely primarily on the argument that even if the Superior Court retains jurisdiction to grant declaratory relief, this was not an appropriate case for the court to exercise its jurisdiction. I agree with the submission that even if the Superior Court had jurisdiction to grant declaratory relief, the application judge erred in declaring that Ms. Danso-Coffey was not liable for retail sales tax.

[27] In considering whether the court has jurisdiction to grant declaratory relief outside the statutory framework, regard must be had to the purpose of the legislation and its wording.

[28] The purpose of the RSTA is to be a revenue raising mechanism; it is also an important policy tool: see, by analogy, Stubart Investments Ltd. v. Canada, 1984 20, [1984] 1 S.C.R. 536, [1984] S.C.J. No. 25, 84 D.T.C. 6305, at pp. 577-79 S.C.R., p. 6323 D.T.C. The values emphasized in fiscal legislation are certainty, predictability and fairness: see Canada Trustco Mortgage Co. v. Canada, 2005 SCC 54, [2005] 2 S.C.R. 601, [2005] S.C.J. No. 56, at para. 12. [page412]

[29] The Minister's position was initially that the RSTA's scheme, which is set out in s. 18 (assessment), s. 24 (notice of objection), s. 25 (appeal), s. 26 (reply to notice of appeal by the Minister) and s. 27 (appeal procedure), specifically removed the jurisdiction of the Superior Court to grant relief outside of the statutory framework. The RSTA was, in its submission, a "complete code".

[30] In its additional submissions filed January 25, 2010, in response to the court's request, the Minister conceded that the Superior Court's power to exercise its inherent jurisdiction in granting discretionary relief is not ousted by these sections of the RSTA, citing the following comparable cases: Toronto (City) v. Olympia Edward Recreation Club Ltd., 1953 138 (ON CA), [1954] O.R. 14, [1953] O.J. No. 710 (C.A.), at paras. 6-10; Canada v. Addison & Leyen Ltd., 2007 SCC 33, [2007] 2 S.C.R. 793, [2007] S.C.J. No. 33, at paras. 7-11, revg 2006 FCA 107, [2006] F.C.J. No. 489, [2006] 4 F.C.R. 532 (C.A.).

[31] But the court's inherent jurisdiction to grant declaratory relief is not to be exercised in a vacuum. As Morawetz J. observed in Scion Capital, LLC v. Gold Fields Ltd., 2006 3286 (ON SC), [2006] O.J. No. 466, 15 B.L.R. (4th) 331 (S.C.J.), at para. 34:

Inherent jurisdiction is a power derived from the very nature of the court as a superior court of law, permitting the court to maintain its authority and to prevent its process being obstructed and abused. In Re Stelco, the Court of Appeal, at para. 35, states:

In spite of the expansive nature of this power, inherent jurisdiction does not operate where Parliament or the legislature has acted. As Farley J. noted in Royal Oak Mines, supra, inherent jurisdiction is "not limitless; if the legislative body has not left a functional gap or vacuum, then inherent jurisdiction should not be brought into play [citations omitted].

[32] A functional gap in the legislation is an example of a jurisprudential reason for the court to exercise its inherent jurisdiction. As discussed above, the application judge erred in finding that there was a "functional gap" in the RSTA. Ms. Danso-Coffey was entitled to object to the assessment by way of a due diligence defence under s. 43(3) of the RSTA. Thus, there was no jurisprudential reason for the court to exercise its inherent jurisdiction to grant a declaration. Simply because Ms. Danso-Coffey's lawyer missed the time limits within which to object to the Minister's assessment or to request a review of its decision does not mean that the Superior Court judge should have exercised his inherent jurisdiction.

[33] Superior Courts must be cautious in exercising their jurisdiction in order to preserve the efficacy of the system of tax assessments. They should respect the structure set up by the legislature and not develop a new form of incidental [page413] litigation: see, by analogy, Canada v. Addison, at paras. 8 and 11, cited below:

We need not engage in a lengthy theoretical discussion on whether s. 18.5 can be used to review the exercise of ministerial discretion. It is not disputed that the Minister belongs to the class of persons and entities that fall within the Federal Court's jurisdiction under s. 18.5. Judicial review is available, provided the matter is not otherwise appealable. It is also available to control abuses of power, including abusive delay. Fact-specific remedies may be crafted to address the wrongs or problems raised by a particular case. . . . . .

Reviewing courts should be very cautious in authorizing judicial review in such circumstances. The integrity and efficacy of the system of tax assessments and appeals should be preserved. Parliament has set up a complex structure to deal with a multitude of tax-related claims and this structure relies on an independent and specialized court, the Tax Court of Canada. Judicial review should not be used to develop a new form of incidental litigation designed to circumvent the system of tax appeals established by Parliament and the jurisdiction of the Tax Court. Judicial review should remain a remedy of last resort in this context.

[34] Whether or not the RSTA is a complete code in the strict sense of that term, the application here was a direct challenge to the validity of an assessment and the provisions of the RSTA govern such challenges.

[35] Where the legislature has specified precisely what conditions must be satisfied to achieve a particular result, it is reasonable to assume that the legislature intended that taxpayers would rely on such provisions to achieve the result they prescribe. Even absent words clear enough to oust the court's jurisdiction, I would infer that the legislature intended disputes concerning the validity of an assessment of tax to be resolved within the RSTA. Thus, the application judge erred in declaring that Ms. Danso-Coffey was not liable for retail sales tax.

(b) The declaration that Ms. Danso-Coffey was never a director

[36] I turn now to the application judge's declaration that Ms. Danso-Coffey was never a director. I would uphold that declaration. The Minister accepted that the RSTA is not relevant to the respondent's request for a declaration that she was never a director of the company. This position can only be based on an implicit acknowledgment that the Superior Court did have jurisdiction to make that declaration pursuant to s. 97 of the Courts of Justice Act and that the declaration is not "any matter arising under this Act" pursuant to s. 29.1(5) of the RSTA. At para. 56 of its factum, the Ministry states: [page414]

Ontario submits that if it is determined that a matter is outside of the RSTA regime, then none of the provisions of the statute, including s. 29.1, has any application, whether the provision is read retroactively or prospectively.

[37] On the basis of the unchallenged evidence concerning the respondent's lack of involvement with the corporation and in the light of the position taken by the Minister, I see no reason to interfere with the application judge's declaration that the respondent was never a director of the company.

[38] Because Ms. Danso-Coffey was never a director of the company, a precondition for the imposition of liability under s. 43(3) was not met. Nonetheless the original assessment remains valid because of s. 18(8). Section 18(8) provides:

18(8) An assessment, subject to being varied or vacated on an objection or appeal and subject to a reassessment, shall be deemed to be valid and binding despite any error, defect or omission therein or in any proceeding under this Act relating thereto.

[39] As the original assessment under the RSTA was valid and cannot be set aside, I would allow the Minister's appeal.

Effect of Declaration

(i) Reassessment

[40] This does not mean that the declaration that Ms. Danso- Coffey was never a director has no effect as the Minister submits. The factual basis on which the assessment was made no longer exists. Ms. Danso-Coffey can thus ask the Ministry to reassess her having regard to the combined operation of s. 43 and s. 18(3) of the RSTA.

[41] Section 43(4) of the RSTA, which provides for assessment of any amount payable by a person who is a director, makes the sections of the Act apply "with such modifications as the circumstances require". Section 18, which deals with assessments, provides as follows in the relevant portion of subsection (3):

18(3) The Minister may assess or reassess any tax payable under this Act by a purchaser . . . within four years from the day such tax became payable. (Emphasis added)

[42] In this case, a necessary modification would be to read the word "director" for "purchaser". The tax became payable by Ms. Danso-Coffey when the Notice of Assessment was sent to her on May 15, 2006. Thus, Ms. Danso-Coffey would have until May 15, 2010 to ask the Minister to reassess her (or to execute a voluntary waiver of the time limit in the RSTA for reassessment). Section 18(8) of the RSTA states that "[a]n assessment, subject to being varied or vacated on an objection or appeal and [page415] subject to a reassessment, shall be deemed to be valid and binding despite any error, defect or omission therein or in any proceeding under this Act relating thereto". Thus, a reassessment could vary or vacate the original assessment.

(ii) Rectification

[43] I also disagree with the Minister's submission that, based on the combined operation of the CIA and the OBCA it is still entitled to rely on an evidentiary presumption that Ms. Danso-Coffey was a director. In order to appreciate the Minister's argument, I will briefly outline the sections on which it relies. Section 2(1) of the CIA requires a corporation to file an initial return as prescribed. Section 1.1 of R.R.O. 1990, Reg. 182 requires that a return set out the names and addresses for service of the corporation's directors, the date on which each became a director and the date on which a director ceased to be a director. Section 20 authorizes the Minister of Consumer and Business Services, currently the Minister of Government Services, to issue a certificate or to certify any fact in the CIA. Section 21 states that the Minister may accept the information contained in any return or notice filed under the CIA without making any inquiry as to its completeness or accuracy. In addition, the Ministry relies on the presumption in s. 262(3) of the OBCA which provides that:

262(3) A director named in the articles or the most recent return or notice filed under the Corporations Information Act, or a predecessor thereof, is presumed for the purposes of this Act to be a director of the corporation referred to in the articles, return or notice.

[44] In my view, a declaration by the court that Ms. Danso- Coffey was never a director would rebut any such presumption.

[45] However, if the Minister persists in relying on the presumption, s. 250(1) of the OBCA permits rectification in cases such as this. It provides:

250(1) Where the name of a person is alleged to be or have been wrongly entered or retained in . . . the registers or other records of a corporation, . . . any aggrieved person may apply to the court for an order that the registers or records be rectified.

[46] It seems to me that Ms. Danso-Coffey would be an "aggrieved person" and that she could bring an application, on notice to the Minister, for rectification under s. 250 of the OBCA and rule 14.05(2) of the Rules of Civil Procedure which permits an application to the Superior Court if, as here, a statute so authorizes. She may also obtain recourse under s. 248 of the OBCA, which is the oppression remedy: see, e.g., Di Battista v. 874687 Ontario Inc. (2005), 2005 51220 (ON SC), 80 O.R. (3d) 136, [2005] O.J. No. 5897 (S.C.J.), [page416] where the court's inherent and equitable jurisdiction was invoked; and see, also, Flatly v. Algy Corp. (c.o.b. Mazzrow's), 2000 22783 (ON SC), [2000] O.J. No. 3787, 100 A.C.W.S. (3d) 411 (S.C.J.), per Swinton J. The fact that this court has upheld a declaration that she was never a director would surely assist such an application.

[47] The fact that Ms. Danso-Coffey's motivation for seeking rectification at this stage is that she has been assessed for retail sales tax does not preclude rectification if it is appropriate. In Aim Funds Management Inc. v. Aim Trimark Corporate Class Inc., [2009] O.J. No. 4798, 64 B.L.R. (4th) 261 (S.C.J.), Perell J. granted the equitable remedy of a rectification order to amend management and distribution contracts and held, at para. 10, ". . . it will be for the tax courts to decide if GST is payable or not based on the rectified contracts". The parties themselves wanted the amendments and brought the application but it was opposed by the Attorney General of Canada because rectification would affect the factual basis on which GST assessments had been made for 26 years. At para. 7 of his reasons, Perell J. stated:

[Aim Funds] conceded that its request for rectification was motivated by the adverse GST consequences associated with the numerous contracts and by a series of tax assessments delivered by Canada Revenue Agency, but the Applicant submits that the motivation for rectification of the contracts is not the reason or grounds for rectification. To rebut the Attorney General's argument, the Applicant says that the advantageous tax consequences of the rectified contracts would simply be an incident of the agreement it originally negotiated but that was incorrectly expressed in the written contracts.

[48] In this case, rectification of the register would correctly express the fact that Ms. Danso-Coffey was never a director. Furthermore, an application for rectification would not run afoul of s. 29.1(5) of the RSTA, as it is not an application for a "matter arising under the [RSTA]".

[49] If the business records of Danso Ltd. are rectified, the Minister will have no basis upon which to ground the presumption that Ms. Danso-Coffey was a director of that corporation.

(iii) The last resort

[50] If the Minister refused to reassess Ms. Danso-Coffey and persisted in trying to collect over $64,000 from her, I note that she could, as a last resort, seek an exemption pursuant to s. 9(1) of the RSTA that provides:

9(1) If, owing to special circumstances, it is deemed inequitable that the whole amount of tax imposed by this Act be paid, the Minister may, with the approval of the Lieutenant Governor in Council, exempt a purchaser from payment of the whole or any part of such tax. [page417]

[51] The procedures discussed above respect the scheme of the Act while at the same time recognizing, as the application judge did, that the equities in this case clearly favour the taxpayer.

[52] It may be that the Minister's position was only with respect to whether the original assessment should be upheld and that that position did not take into consideration the possibility of a reassessment. I would hope that that is the case. The court requested further submissions on the issue of rectification and the Aim Trimark decision. How rectification fits into the entire scheme was not argued before us. However, I am comfortable in making the comments I have because they are precatory in nature, do not affect the outcome of the appeal and Ontario, unlike an ordinary litigant, does not seek to win or lose but to see that justice is done.

Conclusion

[53] For the reasons given above, while I would allow the Minister's appeal with respect to the application judge's declaration that the respondent is not liable for the company's retail sales tax arrears, I would uphold the declaration that Ms. Danso-Coffey was not a director. Although that declaration does not affect the validity of the assessment, the factual basis for assessment of Ms. Danso-Coffey in her personal capacity has changed and, within the scheme of the RSTA, the Minister has a basis to reassess Ms. Danso-Coffey.

Costs

[54] The Minister has been successful on the main aspect of this appeal. Costs in favour of the Minister are fixed in the amount of $16,000, inclusive of disbursements and GST, as agreed by counsel. The costs awarded by the application judge to Ms. Danso-Coffey are set aside. If counsel cannot agree on the Minister's costs below, they may be assessed.

[55] JURIANSZ J.A. (concurring; EPSTEIN J.A. concurring): -- I concur with my colleague Weiler J.A. that the Minister's appeal should be allowed and the declaration that Ms. Danso- Coffey was not liable for retail sales tax set aside.

[56] In my view, s. 29.1 of the Retail Sales Tax Act, R.S.O. 1990, c. R.3 ("RSTA") applied to Ms. Danso-Coffey's application, a question that Weiler J.A. found it unnecessary to decide. Section 29.1(5) provides:

29.1(5) No person other than the Minister may bring an application under subrule 14.05(3) of the Rules of Civil Procedure on or after the day this section comes into force, in respect of any matter arising under this Act. [page418]

[57] The words "on or after the day this section comes into force" are clear. In choosing these clear words, the legislature was obviously aware that any application brought on the day the section came into effect would pertain to matters that arose earlier. Ms. Danso-Coffey brought her application on February 6, 2008, a date more than a year after s. 29.1 came into force on December 20, 2006. The legislative intent is clear and the court must give the words their intended effect.

[58] In any event, I see no issue about the retrospective application of s. 29.1 in the circumstances of this case. The fact that Ms. Danso-Coffey sought a declaration regarding tax liability that arose before s. 29.1 came into effect does not make its application retrospective. At the time she brought her application for a declaration, there was no longer a live controversy about the validity of her tax assessment. She brought her application almost two years after she was assessed under the RSTA, about a year and a half after the time for filing an objection expired, and almost a year after the time limit for seeking an extension of time to file an objection had elapsed. The determination of her tax liability was a closed transaction. Without considering s. 29.1, Weiler J.A. has determined, and I agree, that the legislature intended disputes concerning the validity of an assessment of tax to be resolved within the RSTA. It follows that Ms. Danso-Coffey did not have any right, let alone the vested right, to bring an application to have her tax assessment declared invalid. The application of s. 29.1 to Ms. Danso-Coffey's application does not change the future consequences of any completed transaction. It cannot be said s. 29.1's application to this case is retrospective. The application judge erred by not finding that Ms. Danso-Coffey was not properly before the court.

[59] I would also observe that even if the application judge could have properly exercised jurisdiction to grant Ms. Danso- Coffey a declaration determining her tax liability under the RSTA, he should have declared she was liable for the tax assessed. Rule 14.05(3) [of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194] did not give the application judge the authority to make a declaration that was contrary to the law plainly set out in s. 18(8). The assessment was deemed valid by s. 18(8) of the RSTA.

[60] For these reasons, I concur with Weiler J.A.'s conclusion that this appeal must be allowed and the declaration that Ms. Danso-Coffey is not liable for the tax assessed must be set aside. I agree with Weiler J.A. that the declaration that Ms. Danso-Coffey was never a director of the taxpayer corporation need not be set aside. [page419]

[61] Finally, I do not acquiesce in the discussion Weiler J.A. undertakes after concluding the appeal must be allowed. I do not see it as my role to seek to assist one of the parties before it by, in effect, offering legal advice. The recourse that Ms. Danso-Coffey may yet have and the statutory provisions upon which she might apply are not issues pertinent to this appeal. I would also refrain from commenting on the equities of the case. Time limits and limitation periods serve a valuable function in the legal process by promoting finality. The fact that time limits and limitation periods are to the detriment of parties who miss them does not affect the equities, in my view.

Appeal allowed.

Notes

Note 1: 43(1) Where a corporation has failed to collect tax or has collected tax and failed to remit the tax or has failed to pay any interest or penalty relating thereto, the directors of the corporation at the time the corporation was required to collect or remit the taxes or to pay the interest or corporation to pay such amounts. . . . . .

Prudent Director

(3) A director of a corporation is not liable for a failure described under subsection (1) if the director exercised the degree of care, diligence and skill to prevent the failure that a reasonably prudent person would have exercised in comparable circumstances.

Assessment

(4) The Minister may assess any person for any amount payable by the person under this section and, where the Minister sends a notice of assessment, the sections of the Act respecting assessments, objections and appeals apply with such modifications as the circumstances require.

Note 2: Subsection 2(1) of the CIA requires a corporation to file an initial return. That return includes the names and addresses for service of directors. Section 19 of the CIA authorizes the Minister of Consumer and Business Services, currently the Minister of Government Services, to issue a certificate or to certify any fact in the CIA. Section 21 states that the Minister may accept the information contained in any return or notice filed under the CIA without making any inquiry as to its completeness or accuracy.