Jan 21st, 2021
Aug 14th, 2020
By Hyacinthe Huguet
In Quebec Revenue Agency (QRA) v. 2730-8477 Québec Inc. (2020 QCCQ 2370), the Court of Quebec reaffirmed that in sales tax matters, a reasonable care defence may be invoked by a corporation against an infraction. The offence here consisted in the omission by an employee of one of the restaurants operated by the corporation to have registered a sale in the "SRM" system.
In its analysis, the court reiterated the principle that "(d)ue diligence is an objective standard that weighs the conduct of a defendant against that of another reasonable person in a similar context" (para. 8) (our translation). As well, the court emphasized "that reasonable care is not an obligation of result for the employer" (para. 19) (our translation).
In order to demonstrate that the corporation had met this objective standard of reasonable care, the directors of the corporation put forward several elements that, in their view, demonstrated the care with which they had acted to prevent the kind of oversight that led to the offence.
For example, employees were required to consult and demonstrate their understanding of a manual explaining, among other things, the procedure relating to "SRM". In addition, the directors held biannual meetings during which they reminded employees of this procedure. Finally, employees were trained and supervised as they moved up the organizational structure.
The court considered that the precautions taken by the directors of the corporation constituted concrete measures which served to prevent the type of infraction alleged against the corporation in this case and were sufficient to satisfy the test of reasonable care.
This decision is a useful reminder to restaurant operators and, in general, employers who rely on their employees to fulfill their sales tax obligations, that forgetting or failing to charge sales taxes does not necessarily result in an offence as long as the employer has taken concrete steps to prevent the offence and has exercised reasonable care.