A due-diligence defence is the argument that a person took all reasonable care to comply with an obligation and should therefore not bear a penalty or liability that otherwise attaches to a failure. It appears throughout Canadian tax law, including in the directors' liability rules and in defending gross-negligence penalties.
The standard is generally objective: what a reasonably prudent person would have done in comparable circumstances. For directors facing liability for a corporation's unremitted source deductions or GST/HST, the defence asks whether the director took proactive steps to prevent the failure, not merely whether they were unaware of it. Contemporaneous records of the steps taken are often decisive.