{"id":6295,"date":"2023-01-17T14:01:12","date_gmt":"2023-01-17T19:01:12","guid":{"rendered":"https:\/\/www.millerthomson.com\/checking-the-box-not-enough-avoid-directors-liability-outside-director\/"},"modified":"2025-12-29T16:47:24","modified_gmt":"2025-12-29T21:47:24","slug":"checking-the-box-not-enough-avoid-directors-liability-outside-director","status":"publish","type":"post","link":"https:\/\/www.millerthomson.com\/en\/insights\/corporate-tax\/checking-the-box-not-enough-avoid-directors-liability-outside-director\/","title":{"rendered":"\u201cChecking the Box\u201d not enough to avoid director\u2019s liability for outside director"},"content":{"rendered":"\n

A decision of the Tax Court of Canada has provided further insight into the duties of an \u201coutside\u201d director who wishes to rely on the due diligence defence to avoid a director\u2019s liability assessment under the Income Tax Act <\/em>(the \u201cAct<\/strong>\u201d).<\/p>\n\n\n\n

In Burnett v The Queen <\/em>(2022 TCC 99), the taxpayer was assessed pursuant to section 227.1 of the Act for unremitted payroll source deductions of Canadian Noble Cut Diamonds Ltd. (\u201cCNCD<\/strong>\u201d), of which he was a director. The taxpayer, who had previously been a director of numerous private and public corporations, viewed himself as an outside director, and did not have access to CNCD\u2019s bank account and was not a signing officer.<\/p>\n\n\n\n

The taxpayer testified that at each board meeting he asked another director, who was president of CNCD and led its daily operations, about whether payroll source remittances were current. The response was always to the effect that all was up to date and there were no concerns.<\/p>\n\n\n\n

The taxpayer submitted that, as an outside director, it was sufficient for purposes of the due diligence defence that he \u201cchecked the box\u201d at each directors\u2019 meeting by enquiring as to the status of the payroll remittances. The taxpayer testified that, given the number of employees of CNCD, he hadn\u2019t considered the payroll material, relative to the cash flows and assets of the business, and that it wasn\u2019t on his radar.<\/p>\n\n\n\n

The Court found that simply asking the \u201ccheck the box\u201d question did not constitute an effort to prevent the failure to make the remittances on a timely basis, but merely asked whether or not such failure had already occurred. The evidence showed that CNCD was unable to generate reliable books and records that would allow audited financial statements to be generated by its accountants. According to the Court, a \u201creasonably prudent person\u201d in such circumstances, given this \u201cred flag\u201d, would have sought documentary proof of payroll remittances, and absent same would have contacted the Canada Revenue Agency directly to ascertain whether remittances were current.<\/p>\n\n\n\n

The Federal Court of Appeal decision in Buckingham<\/em> (2011 FCA 142) found that the focus of the due diligence provisions is \u201cclearly on the prevention of failures to remit\u201d. As the Tax Court found in Burnett, <\/em>an after-the-fact inquiry will not prevent the failure from occurring, and therefore falls short of the standard set by Buckingham<\/em>. The decision in Burnett <\/em>provides a useful reminder of the obligations an \u201coutside\u201d director who wishes to demonstrate due diligence, and the active steps that should be taken by such directors when faced with similar red flags regarding a corporation\u2019s remittances.<\/p>\n\n\n\n

Should you have any questions or concerns, please feel free to reach out to a member of Miller Thomson’s Corporate Tax<\/a> Group.<\/p>\n","protected":false},"excerpt":{"rendered":"

A decision of the Tax Court of Canada has provided further insight into the duties of an \u201coutside\u201d director who wishes to rely on the due diligence defence to avoid a director\u2019s liability assessment under the Income Tax Act (the \u201cAct\u201d). In Burnett v The Queen (2022 TCC 99), the taxpayer was assessed pursuant to […]<\/p>\n","protected":false},"author":86,"featured_media":14343,"parent":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[551],"insight-format":[416],"class_list":["post-6295","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-corporate-tax"],"acf":[],"yoast_head":"\n\u201cChecking the Box\u201d not enough to avoid director\u2019s liability for outside director | Miller Thomson<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.millerthomson.com\/en\/insights\/corporate-tax\/checking-the-box-not-enough-avoid-directors-liability-outside-director\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"\u201cChecking the Box\u201d not enough to avoid director\u2019s liability for outside director | Miller Thomson\" \/>\n<meta property=\"og:description\" content=\"A decision of the Tax Court of Canada has provided further insight into the duties of an \u201coutside\u201d director who wishes to rely on the due diligence defence to avoid a director\u2019s liability assessment under the Income Tax Act (the \u201cAct\u201d). In Burnett v The Queen (2022 TCC 99), the taxpayer was assessed pursuant to […]\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.millerthomson.com\/en\/insights\/corporate-tax\/checking-the-box-not-enough-avoid-directors-liability-outside-director\/\" \/>\n<meta property=\"og:site_name\" content=\"Miller Thomson\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/MillerThomsonLaw\/\" \/>\n<meta property=\"article:published_time\" content=\"2023-01-17T19:01:12+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2025-12-29T21:47:24+00:00\" \/>\n<meta name=\"author\" content=\"Nyeisha Murray\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@millerthomson\" \/>\n<meta name=\"twitter:site\" content=\"@millerthomson\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Nyeisha Murray\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"2 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/www.millerthomson.com\/en\/insights\/corporate-tax\/checking-the-box-not-enough-avoid-directors-liability-outside-director\/#article\",\"isPartOf\":{\"@id\":\"https:\/\/www.millerthomson.com\/en\/insights\/corporate-tax\/checking-the-box-not-enough-avoid-directors-liability-outside-director\/\"},\"author\":{\"name\":\"Nyeisha Murray\",\"@id\":\"https:\/\/www.millerthomson.com\/en\/#\/schema\/person\/8c49b710501a2ba22438ca72fb0c0c85\"},\"headline\":\"\u201cChecking the Box\u201d not enough to avoid director\u2019s liability for outside director\",\"datePublished\":\"2023-01-17T19:01:12+00:00\",\"dateModified\":\"2025-12-29T21:47:24+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/www.millerthomson.com\/en\/insights\/corporate-tax\/checking-the-box-not-enough-avoid-directors-liability-outside-director\/\"},\"wordCount\":468,\"publisher\":{\"@id\":\"https:\/\/www.millerthomson.com\/en\/#organization\"},\"image\":{\"@id\":\"https:\/\/www.millerthomson.com\/en\/insights\/corporate-tax\/checking-the-box-not-enough-avoid-directors-liability-outside-director\/#primaryimage\"},\"thumbnailUrl\":\"https:\/\/www.millerthomson.com\/wp-content\/uploads\/2024\/10\/Insights_Corporate-tax_Post-Image.jpg\",\"articleSection\":[\"Corporate Tax\"],\"inLanguage\":\"en-US\"},{\"@type\":[\"WebPage\",\"ItemPage\"],\"@id\":\"https:\/\/www.millerthomson.com\/en\/insights\/corporate-tax\/checking-the-box-not-enough-avoid-directors-liability-outside-director\/\",\"url\":\"https:\/\/www.millerthomson.com\/en\/insights\/corporate-tax\/checking-the-box-not-enough-avoid-directors-liability-outside-director\/\",\"name\":\"\u201cChecking the Box\u201d not enough to avoid director\u2019s liability for outside director | Miller Thomson\",\"isPartOf\":{\"@id\":\"https:\/\/www.millerthomson.com\/en\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\/\/www.millerthomson.com\/en\/insights\/corporate-tax\/checking-the-box-not-enough-avoid-directors-liability-outside-director\/#primaryimage\"},\"image\":{\"@id\":\"https:\/\/www.millerthomson.com\/en\/insights\/corporate-tax\/checking-the-box-not-enough-avoid-directors-liability-outside-director\/#primaryimage\"},\"thumbnailUrl\":\"https:\/\/www.millerthomson.com\/wp-content\/uploads\/2024\/10\/Insights_Corporate-tax_Post-Image.jpg\",\"datePublished\":\"2023-01-17T19:01:12+00:00\",\"dateModified\":\"2025-12-29T21:47:24+00:00\",\"breadcrumb\":{\"@id\":\"https:\/\/www.millerthomson.com\/en\/insights\/corporate-tax\/checking-the-box-not-enough-avoid-directors-liability-outside-director\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/www.millerthomson.com\/en\/insights\/corporate-tax\/checking-the-box-not-enough-avoid-directors-liability-outside-director\/\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.millerthomson.com\/en\/insights\/corporate-tax\/checking-the-box-not-enough-avoid-directors-liability-outside-director\/#primaryimage\",\"url\":\"https:\/\/www.millerthomson.com\/wp-content\/uploads\/2024\/10\/Insights_Corporate-tax_Post-Image.jpg\",\"contentUrl\":\"https:\/\/www.millerthomson.com\/wp-content\/uploads\/2024\/10\/Insights_Corporate-tax_Post-Image.jpg\",\"width\":1776,\"height\":994},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/www.millerthomson.com\/en\/insights\/corporate-tax\/checking-the-box-not-enough-avoid-directors-liability-outside-director\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/www.millerthomson.com\/en\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"\u201cChecking the Box\u201d not enough to avoid director\u2019s liability for outside director\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/www.millerthomson.com\/en\/#website\",\"url\":\"https:\/\/www.millerthomson.com\/en\/\",\"name\":\"Miller Thomson\",\"description\":\"National law firm providing business law expertise and litigation and disputes services for businesses across Canada since 1957.\",\"publisher\":{\"@id\":\"https:\/\/www.millerthomson.com\/en\/#organization\"},\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/www.millerthomson.com\/en\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"},{\"@type\":\"Organization\",\"@id\":\"https:\/\/www.millerthomson.com\/en\/#organization\",\"name\":\"Miller Thomson\",\"url\":\"https:\/\/www.millerthomson.com\/en\/\",\"logo\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.millerthomson.com\/en\/#\/schema\/logo\/image\/\",\"url\":\"https:\/\/www.millerthomson.com\/wp-content\/uploads\/2024\/10\/miller-thomson.svg\",\"contentUrl\":\"https:\/\/www.millerthomson.com\/wp-content\/uploads\/2024\/10\/miller-thomson.svg\",\"width\":380,\"height\":50,\"caption\":\"Miller Thomson\"},\"image\":{\"@id\":\"https:\/\/www.millerthomson.com\/en\/#\/schema\/logo\/image\/\"},\"sameAs\":[\"https:\/\/www.facebook.com\/MillerThomsonLaw\/\",\"https:\/\/x.com\/millerthomson\",\"https:\/\/www.linkedin.com\/company\/miller-thomson-llp\/\",\"https:\/\/www.youtube.com\/@millerthomson\"]},{\"@type\":\"Person\",\"@id\":\"https:\/\/www.millerthomson.com\/en\/#\/schema\/person\/8c49b710501a2ba22438ca72fb0c0c85\",\"name\":\"Nyeisha Murray\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.millerthomson.com\/en\/#\/schema\/person\/image\/\",\"url\":\"https:\/\/secure.gravatar.com\/avatar\/ec01113c3c7208ac683f05f5b7f25e187ddf5deabc82d0d9e12aeca8d3b9c851?s=96&d=mm&r=g\",\"contentUrl\":\"https:\/\/secure.gravatar.com\/avatar\/ec01113c3c7208ac683f05f5b7f25e187ddf5deabc82d0d9e12aeca8d3b9c851?s=96&d=mm&r=g\",\"caption\":\"Nyeisha Murray\"}}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"\u201cChecking the Box\u201d not enough to avoid director\u2019s liability for outside director | Miller Thomson","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/www.millerthomson.com\/en\/insights\/corporate-tax\/checking-the-box-not-enough-avoid-directors-liability-outside-director\/","og_locale":"en_US","og_type":"article","og_title":"\u201cChecking the Box\u201d not enough to avoid director\u2019s liability for outside director | Miller Thomson","og_description":"A decision of the Tax Court of Canada has provided further insight into the duties of an \u201coutside\u201d director who wishes to rely on the due diligence defence to avoid a director\u2019s liability assessment under the Income Tax Act (the \u201cAct\u201d). In Burnett v The Queen (2022 TCC 99), the taxpayer was assessed pursuant to […]","og_url":"https:\/\/www.millerthomson.com\/en\/insights\/corporate-tax\/checking-the-box-not-enough-avoid-directors-liability-outside-director\/","og_site_name":"Miller Thomson","article_publisher":"https:\/\/www.facebook.com\/MillerThomsonLaw\/","article_published_time":"2023-01-17T19:01:12+00:00","article_modified_time":"2025-12-29T21:47:24+00:00","author":"Nyeisha Murray","twitter_card":"summary_large_image","twitter_creator":"@millerthomson","twitter_site":"@millerthomson","twitter_misc":{"Written by":"Nyeisha Murray","Est. reading time":"2 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"Article","@id":"https:\/\/www.millerthomson.com\/en\/insights\/corporate-tax\/checking-the-box-not-enough-avoid-directors-liability-outside-director\/#article","isPartOf":{"@id":"https:\/\/www.millerthomson.com\/en\/insights\/corporate-tax\/checking-the-box-not-enough-avoid-directors-liability-outside-director\/"},"author":{"name":"Nyeisha Murray","@id":"https:\/\/www.millerthomson.com\/en\/#\/schema\/person\/8c49b710501a2ba22438ca72fb0c0c85"},"headline":"\u201cChecking the Box\u201d not enough to avoid director\u2019s liability for outside director","datePublished":"2023-01-17T19:01:12+00:00","dateModified":"2025-12-29T21:47:24+00:00","mainEntityOfPage":{"@id":"https:\/\/www.millerthomson.com\/en\/insights\/corporate-tax\/checking-the-box-not-enough-avoid-directors-liability-outside-director\/"},"wordCount":468,"publisher":{"@id":"https:\/\/www.millerthomson.com\/en\/#organization"},"image":{"@id":"https:\/\/www.millerthomson.com\/en\/insights\/corporate-tax\/checking-the-box-not-enough-avoid-directors-liability-outside-director\/#primaryimage"},"thumbnailUrl":"https:\/\/www.millerthomson.com\/wp-content\/uploads\/2024\/10\/Insights_Corporate-tax_Post-Image.jpg","articleSection":["Corporate Tax"],"inLanguage":"en-US"},{"@type":["WebPage","ItemPage"],"@id":"https:\/\/www.millerthomson.com\/en\/insights\/corporate-tax\/checking-the-box-not-enough-avoid-directors-liability-outside-director\/","url":"https:\/\/www.millerthomson.com\/en\/insights\/corporate-tax\/checking-the-box-not-enough-avoid-directors-liability-outside-director\/","name":"\u201cChecking the Box\u201d not enough to avoid director\u2019s liability for outside director | Miller Thomson","isPartOf":{"@id":"https:\/\/www.millerthomson.com\/en\/#website"},"primaryImageOfPage":{"@id":"https:\/\/www.millerthomson.com\/en\/insights\/corporate-tax\/checking-the-box-not-enough-avoid-directors-liability-outside-director\/#primaryimage"},"image":{"@id":"https:\/\/www.millerthomson.com\/en\/insights\/corporate-tax\/checking-the-box-not-enough-avoid-directors-liability-outside-director\/#primaryimage"},"thumbnailUrl":"https:\/\/www.millerthomson.com\/wp-content\/uploads\/2024\/10\/Insights_Corporate-tax_Post-Image.jpg","datePublished":"2023-01-17T19:01:12+00:00","dateModified":"2025-12-29T21:47:24+00:00","breadcrumb":{"@id":"https:\/\/www.millerthomson.com\/en\/insights\/corporate-tax\/checking-the-box-not-enough-avoid-directors-liability-outside-director\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/www.millerthomson.com\/en\/insights\/corporate-tax\/checking-the-box-not-enough-avoid-directors-liability-outside-director\/"]}]},{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.millerthomson.com\/en\/insights\/corporate-tax\/checking-the-box-not-enough-avoid-directors-liability-outside-director\/#primaryimage","url":"https:\/\/www.millerthomson.com\/wp-content\/uploads\/2024\/10\/Insights_Corporate-tax_Post-Image.jpg","contentUrl":"https:\/\/www.millerthomson.com\/wp-content\/uploads\/2024\/10\/Insights_Corporate-tax_Post-Image.jpg","width":1776,"height":994},{"@type":"BreadcrumbList","@id":"https:\/\/www.millerthomson.com\/en\/insights\/corporate-tax\/checking-the-box-not-enough-avoid-directors-liability-outside-director\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/www.millerthomson.com\/en\/"},{"@type":"ListItem","position":2,"name":"\u201cChecking the Box\u201d not enough to avoid director\u2019s liability for outside director"}]},{"@type":"WebSite","@id":"https:\/\/www.millerthomson.com\/en\/#website","url":"https:\/\/www.millerthomson.com\/en\/","name":"Miller Thomson","description":"National law firm providing business law expertise and litigation and disputes services for businesses across Canada since 1957.","publisher":{"@id":"https:\/\/www.millerthomson.com\/en\/#organization"},"potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/www.millerthomson.com\/en\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"},{"@type":"Organization","@id":"https:\/\/www.millerthomson.com\/en\/#organization","name":"Miller Thomson","url":"https:\/\/www.millerthomson.com\/en\/","logo":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.millerthomson.com\/en\/#\/schema\/logo\/image\/","url":"https:\/\/www.millerthomson.com\/wp-content\/uploads\/2024\/10\/miller-thomson.svg","contentUrl":"https:\/\/www.millerthomson.com\/wp-content\/uploads\/2024\/10\/miller-thomson.svg","width":380,"height":50,"caption":"Miller Thomson"},"image":{"@id":"https:\/\/www.millerthomson.com\/en\/#\/schema\/logo\/image\/"},"sameAs":["https:\/\/www.facebook.com\/MillerThomsonLaw\/","https:\/\/x.com\/millerthomson","https:\/\/www.linkedin.com\/company\/miller-thomson-llp\/","https:\/\/www.youtube.com\/@millerthomson"]},{"@type":"Person","@id":"https:\/\/www.millerthomson.com\/en\/#\/schema\/person\/8c49b710501a2ba22438ca72fb0c0c85","name":"Nyeisha Murray","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.millerthomson.com\/en\/#\/schema\/person\/image\/","url":"https:\/\/secure.gravatar.com\/avatar\/ec01113c3c7208ac683f05f5b7f25e187ddf5deabc82d0d9e12aeca8d3b9c851?s=96&d=mm&r=g","contentUrl":"https:\/\/secure.gravatar.com\/avatar\/ec01113c3c7208ac683f05f5b7f25e187ddf5deabc82d0d9e12aeca8d3b9c851?s=96&d=mm&r=g","caption":"Nyeisha Murray"}}]}},"_links":{"self":[{"href":"https:\/\/www.millerthomson.com\/en\/wp-json\/wp\/v2\/posts\/6295","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.millerthomson.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.millerthomson.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.millerthomson.com\/en\/wp-json\/wp\/v2\/users\/86"}],"replies":[{"embeddable":true,"href":"https:\/\/www.millerthomson.com\/en\/wp-json\/wp\/v2\/comments?post=6295"}],"version-history":[{"count":0,"href":"https:\/\/www.millerthomson.com\/en\/wp-json\/wp\/v2\/posts\/6295\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.millerthomson.com\/en\/wp-json\/wp\/v2\/media\/14343"}],"wp:attachment":[{"href":"https:\/\/www.millerthomson.com\/en\/wp-json\/wp\/v2\/media?parent=6295"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.millerthomson.com\/en\/wp-json\/wp\/v2\/categories?post=6295"},{"taxonomy":"insight-format","embeddable":true,"href":"https:\/\/www.millerthomson.com\/en\/wp-json\/wp\/v2\/insight-format?post=6295"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}