Citation:
2017TCC20
Date: 20170131
Docket: 2014-3841(GST)G
BETWEEN:
2252493
ONTARIO LIMITED,
Appellant,
and
HER
MAJESTY THE QUEEN,
Respondent.
REASONS
FOR JUDGMENT
Bocock J.
I. Introduction
and GST on Real Property
[1]
Under the Excise Tax Act, R.S.C. 1985, c E‑15,
as amended (the “ETA”), a person who makes a taxable supply shall collect
goods and services tax, now referred to in Ontario as harmonized sales tax
(“HST”). This requirement is contained in the general charging provision under
subsection 221(1). There are exceptions in respect of real property,
whereby the “supplier” of real property need not collect and remit HST under
certain conditions. A critical condition to the exception requires the
“recipient” of the supply to be a registrant under paragraph 221(2)(b)
of the ETA. When that and other conditions (not relevant to this appeal)
are met, the recipient of the supply of the real property assesses itself for
HST and pays the Receiver General directly.
[2]
In this appeal, the Appellant, 2252493 Ontario
Limited, the supplier (vendor) of the commercial real property, states that a
certain party was both a recipient of the supply and a registrant under the ETA.
The Minister of National Revenue (“Minister”) states the recipient was a
different party and a non‑registrant. Since, the registrant status of
either party’s ascribed recipient is not in dispute, the identity of the
recipient of the supply is the sole issue to be determined by this Court. If
the non-registrant recipient is who the Minister says, then, the sum of $416,881.83
(the “HST Amount”) was payable by the Appellant on the sale of the commercial
real property and the reassessment stands.
II. Facts
a)
Witnesses
[3]
Testimony before the Court was provided for the
Appellant through three witnesses: Mr. Corazon Tan (“Mr. Tan”), a
principal shareholder, officer and director of the Appellant; Mr. Yee, a
solicitor who acted for the Appellant on the sale of the real property located
at 840 Yonge Street in Toronto (the “Property”); and Mr. Ambrose,
an accountant who acted for the principals of both of the companies asserted by
the Appellant to have been the registrant-recipients. For the Respondent,
Ms. Tsioubris, a Canada Revenue Agency (“CRA”) officer testified. Cumulatively,
from the testimony of these witnesses, mainly concerning the legal
documentation memorializing the sale and ownership of the Property, the factual
basis for determining the correct identity of the recipient emerges.
b)
A sale of Property
[4]
In the late summer of 2011, Mr. Tan was
approached by a then unknown real estate agent regarding the sale of the Property
to a then unknown buyer. An agreement of purchase and sale (“APS”) was
concluded on October 29, 2011. The purchase price was the sum of
$3,200,000.00. It was payable in full on the closing date of August 29,
2012. The APS contained the usual terms printed on or inserted within the
Ontario Real Estate Association standard commercial form of APS. Section 7
provided:
7. GST/HST: If the sale of the property (Real Property as
described above) is subject to Goods and Services Tax (GST) or Harmonized Sales
Tax (HST), then such tax shall be in addition to the Purchase Price. The
Seller will not collect GST or HST if the Buyer provides to the Seller a
warranty that the Buyer is registered under the Excise Tax Act (“ETA”),
together with a copy of the Buyer’s ETA registration, a warranty that the Buyer
shall self‑assess and remit the GST or HST payable and file the
prescribed form and shall indemnify the Seller in respect of any GST or HST
payable. The foregoing warranties shall not merge but shall survive the
completion of the transaction. If the sale of the property is not subject
to GST or HST, Seller agrees to certify on or before closing, that the
transaction is not subject to GST or HST. Any HST on chattels, if applicable,
is not included in the purchase price.
The APS described the “Buyer” as Mayling Holding Inc. (“Mayling”).
Other than Mayling and the Appellant, no other party executed or was referenced
in the APS or in a related written amendment which waived certain conditions concerning
due diligence.
c)
The Closing and
Documentation
[5]
On the day fixed for closing, August 29,
2012 (the “closing date”), the parties’ legal documents were exchanged. The
documents were prepared in some cases by Mr. Yee and, in others, by
Mr. Romanelli of Bratty & Co., solicitors for Mayling and the
other related “purchasing” parties. Among those documents, Mayling executed and
delivered a document entitled a “Direction Re Title” addressed to the
Appellant and Mr. Yee’s firm. The document was dated and executed by the
president of Mayling. It defined Mayling Holding Inc. as Purchaser of
the Property and directed that “the deed or transfer” be engrossed as follows:
840 YONGE
STREET HOLDINGS INC.
Address for
service:
c/o 7501 Keele Street
Suite 200
Vaughan, ON L4K
1Y2
Attention:
Anthony Romanelli
[6]
The following operative closing documents were also
executed and delivered by the Appellant:
i) Direction
for closing funds, executed August 27, 2012 by the Appellant;
ii) Warranty
regarding the Property, executed on August 27, 2012 by Mr. Tan for the
Appellant;
iii) Bill
of Sale for the Property, executed August 27, 2012 by Mr. Tan for the
Appellant;
iv) Declaration
of Possession of the Property, executed August 27, 2012 by Mr. Tan in his
capacity as president of the Appellant;
v) Statutory
Declaration, executed August 27, 2012 by Mr. Tan;
vi) Vendor’s
Assignment of Leases and Tenancies granted by the Appellant in favour of 840 Yonge
Street Inc. (“840 Holdings”), executed August 27, 2012 by Mr. Tan as
president;
vii) Notice
and Direction to Tenants (Sale Transaction), executed August 27, 2012 by
Mr. Tan as president of the Appellant describing 840 Holdings as the
“Purchaser”;
viii) Statutory
Declaration sworn by Mr. Tan, August 27, 2012;
ix) Two
distinct Tenant Acknowledgments providing for the warranties of two commercial
tenants concerning rental terms and confirming receipt of a notice of the sale
of the Property and new addressee and payee for rents.
[7]
Aside from the very last described Tenant
Acknowledgments, all documents defined or identified 840 Holdings as the
purchaser.
[8]
In addition to the direction re: title, the
following closing documents were delivered by Mayling and/or 840 Holdings:
i) Statutory Declaration regarding HST, sworn the 28th day of
August, 2012 by Anthony Romanelli as an authorized signing officer of 840
Holdings;
ii) Declaration and Indemnity concerning self-assessment, remittance
and indemnification for loss regarding HST arising from the sale of the
Property executed by Mr. Romanelli as an authorized signing officer of 840
Holdings and dated as of the 28th day of August, 2012.
[9]
With respect to the two Tenant Acknowledgements,
each was addressed to “Mayling or its assigns (the “Purchaser”)”, as purchaser.
Each Tenant Acknowledgment confirmed the status of the underlying lease, rental
payments, deposits and good standing status.
[10]
The Appellant alone executed the above-noted
assignment of Leases and Tenancies addressed to the Appellant as “assignee” and
referencing Mayling as the “Purchaser” assuming the existing tenants. An
excerpt from the document’s recitals provided as follows:
WHEREAS
by Agreement of Purchase and Sale dated October 29, 2011, as amended from
time to time, (hereinafter called the “Purchase Agreement”) the Assignor, as
vendor agreed to sell to Mayling Holdings Inc. (the “Purchaser”) as purchaser,
and the Purchaser agreed to purchase from the Assignor those lands located in
the City of Toronto, in the Province of Ontario, and legally described as Part
of Lot 4 and 5, Plan 355, Yorkville as in CT906968, Toronto and
comprising PIN 21197‑0149 (LT) (hereinafter called the “Lands”);
AND
WHEREAS the Purchase Agreement provides that the Purchaser agrees to assume the
existing tenants on the Lands;
AND
WHEREAS the Purchaser by way of Title Direction dated the 27th
day of August, 2012, directed title to the Lands to the Assignee;
[11]
The transfer for the Property was registered on
August 30, 2012 and provided the following registration particulars:
Transferee:
840 Yonge Street Holdings Inc.
[12]
The Land Transfer Tax Affidavit was sworn by
Mr. Romanelli, as the “Transferee – 840 YONGE STREET HOLDINGS INC.”, “(e)
The President, Vice‑President, Manager, Secretary, Director, or Treasurer
authorized to act for 840 YONGE STREET HOLDINGS INC. described in
paragraph(s) (c) above.” Box (b) of the Land Transfer Tax Affidavit
containing the words “A trustee named in the above‑described conveyance
to whom the land is being conveyed” was not checked as applicable.
[13]
The Statement of Adjustments remained dated
August 29, 2012 and reflected payment of the purchase price and adjustments for
rent, but no collection of HST on the supply of the Property. Mr. Yee
testified HST was not collected because he was of the opinion the Direction Re:
Title made 840 Holdings the recipient. Further, a statutory declaration
was provided containing 840 Holdings’s HST registration number and a HST
Registry Search dated August 29, 2012 confirmed 840 Holdings’s
registrant status. Accordingly, Mr. Yee concluded the self-assessing provisions
of the APS applied to 840 Holdings. Therefore, it was legally required to
self‑assess and remit the HST on the sale of the Property. More
importantly the Appellant, his client, was not and did not. Peculiar is the
fact that 840 Holdings’ HST registrant status was retroactively revoked, by its
request, in January, 2013, effective August 23, 2012.
[14]
Although all documents were delivered and
payments were tendered in time for registration on the closing date, August 29,
2012, testimony at trial confirmed that registration and release occurred on
August 30, 2012. No closing documents, including the statement of adjustments,
were amended to reflect a closing date other than August 29, 2012.
d) Post‑closing Reassessment
[15]
After reviewing the documents during an audit
and on the assumption that Mayling was the recipient of the Property and a
non-registrant for HST purposes, the Appellant was reassessed by the Minister on
February 15, 2013 for its reporting period August 5, 2012 to
October 31, 2012.
[16]
After the reassessment, the following
documentation was gathered and/or furnished by counsel or representatives of
840 Holdings and/or the asserted recipients to the Appellant:
|
Document Title
|
Date
|
Summary Description of Contents
|
|
Amended and Restated Co‑tenancy
Agreement (“Co-Tenancy Agreement”) among:
Bazis YYC Inc. (“Bazis YYC”);
Plazacorp Holdings Limited (“Plazacorp”);
840 Holdings;
846 Yonge Street Holdings Ltd.
|
“Made effective
as of the 28th day of August, 2012”
|
This restated
agreement revises an “original” co-tenancy agreement and reflects the
following terms:
a)
creates “Nominee”
status for both 840 Holdings and another company 846 Yonge Street Holdings
Inc. (“846 Yonge”);
b)
designates the beneficial
ownership of the Property and other properties for Bazis YYC and Plazacorp
(“members”);
c)
apportions the distribution
of profits, assets and liability among the members;
d)
details the powers
regarding the ongoing management of properties; and
e)
grants 846 Yonge’s
responsibility as HST collector and remitter.
|
|
Purchaser’s Statutory Declaration sworn by President of Bazis YYC and
indemnity agreement executed by authorized offices of 840 Holdings and Bazis
YYC re: Harmonized sales tax
|
“Dated as of the
30th August, 2012”
|
This standard
document provides within its terms that:
1.
840 Holdings is
purchasing the Property as trustee on behalf of Bazis YYC;
2.
Bazis YYC is a HST
registrant;
3.
HST is payable on the
purchase and the “undersigned” “having paid or agreed to pay HST” are liable for
HST;
4.
Both 840 Holdings and
Bazis YYC indemnify the Appellant, as vendor.
|
|
Statutory Declaration of Michael Gold, President of Bazis YYC
|
August 30,
2012
|
This standard
declaration confirms Bazis YYC’s HST registrant status, GST number and
confirms the use of the Property for commercial purposes and that “the
corporation will file on or before the due date of the corporation’s HST
return…, the tax return for the acquisition of real property as set out under
subsections 221(2)…of the Act”
|
|
GST/HST Registry Search Result
for Bazis YYC
|
October 20, 2012
|
The search
conducted October 20, 2012, reveals Bazis YYC was a HST registrant as of
August 29, 2012
|
|
GST/HST Registry Search Result for Plazacorp
|
November 27, 2014
|
The search
conducted November 27, 2014 reveals Plazacorp was a HST registrant as of
August 30, 2012
|
[17]
All of the Co-Tenancy Agreement, Purchaser’s Statutory
Declaration and Indemnity re: HST, were challenged at the hearing by
Respondent’s counsel as to their authenticity regarding dating and therefore for
the truth of their contents as of that date. Mr. Yee, admitted in testimony
that neither he nor the Appellant had any knowledge of these documents nor the
existence or involvement of Bazis YYC or Plazacorp until after the Minister’s reassessment
was issued.
[18]
Additionally, provincial ministry records were
adduced into evidence regarding incorporation dates. 840 Holdings and Bazis YYC
were incorporated after the APS was executed, but before the closing date.
Plazacorp subsisted before the APS was executed.
III.
The Statutory Provisions
[19]
The applicable and relevant extracts from the ETA
are as follows [underlining added for emphasis]:
Collection
of tax
221(1) Every
person who makes a taxable supply shall, as agent of Her Majesty in right
of Canada, collect the tax under Division II payable by the recipient
in respect of the supply.
Exception
(2) A supplier
(other than a prescribed supplier) who makes a taxable supply of real property
by way of sale is not required to collect tax under Division II payable by
the recipient in respect of the supply where
. . .
(b) the recipient is registered under Subdivision d and,
…
Self-assessment
on acquisition of real property
228(4) Where
tax under Division II is payable by a person in respect of a supply of
real property and the supplier is not required to collect the tax and is
not deemed to have collected the tax,
(a) where
the person is a registrant and acquired the property for use or supply
primarily in the course of commercial activities of the person, the
person shall, on or before the day on or before which the person’s return
for the reporting period in which the tax became payable is required to be
filed, pay the tax to the Receiver General and report the tax in that return;
and
. . .
subsection 123(1), definition of “recipient”
and definition of “supply” provides:
recipient of a supply of property or a service means
(a) where consideration for the supply is payable under an agreement
for the supply, the person who is liable under the agreement to pay that
consideration.
…
and lastly, section 133 speaks to the deemed
timing of the supply:
Agreement as supply
133 For the
purposes of this Part, where an agreement is entered into to provide
property or a service,
(a) the entering into of the
agreement shall be deemed to be a supply of the property or service made at
the time the agreement is entered into; and
(b) the provision, if any, of
property or a service under the agreement shall be deemed to be part of
the supply referred to in paragraph (a) and not a separate supply.
IV. Parties’
Legal Submissions
a)
Appellant’s
submissions
[20]
Appellant’s counsel asserts that the recipient of
the supply is not Mayling, but Bazis YYC and/or PLazacorp on the following
basis: i) at the time of the closing of the sale of the Property,
August 29, 2012 (the “closing date”), the Appellant was directed to put
title in the name of 840 Holdings. ii) 840 Holdings was a GST/HST
registrant at that time; iii) at a later date, and as a result of receiving a
copy of the Co-tenancy Agreement, the Appellant was advised that 840 Holdings
had acquired the Property in trust as a bare trustee, nominee or agent on the
closing date for Bazis YYC and/or Plazacorp who were equal beneficial owners (“Beneficial
Owners”) and/or principals; iv) the Beneficial Owners paid the consideration;
and, v) the Beneficial Owners were GST/HST registrants as of the closing date
and self‑assessed for HST arising from the sale and purchase of the
Property.
[21]
Notwithstanding that Mayling was described as the
purchaser within the APS, the Appellant submits that because the Beneficial Owners
of the Property were the recipients of the supply and GST/HST registrants at
the closing date, the Appellant was not required to collect GST/HST under
subparagraph 221(1)(b) of the ETA. Although acknowledged by both
parties as irrelevant to the reassessment, the Appellant also noted that the HST
Amount has been self‑assessed and paid by the Beneficial Owners. As a
result of the reassessment, the sale of the Property has been twice subject to
HST. This represents a windfall for the Respondent.
[22]
To substantiate these assertions, Appellant’s
counsel referenced the CRA’s various publications which state that “where a
transaction is made by the trustee as an undisclosed agent, the beneficial
owner, as principal, will be liable for the collection and remittance of the
tax”. This statement is reflected in GST/HST Policy Statement P‑105, “Treatment
of Bare Trusts Under the Excise Tax Act”, July 20, 1992. Similarly, the
Appellant contends various other publications throughout the last two or more
decades have indicated that where a bare trust exists, the beneficial owner has
the liability and the responsibility to self‑assess and remit the HST:
CRA Technical Information Bulletin B‑068, “Bare Trusts” (20 January
1993); CRA GST/HST Memorandum 8.1, “General Eligibility Rules” (May 2005),
s. 69; David M. Sherman, “221(2) Obligation to Collect Tax –
Exceptions” (2016), p. 221‑211, Thomson
Reuters Canada Ltd. (Canada GST Service); CCRA and ICAA GST/HST Roundtable (May
2005), Question 2; CRA and ICAA GST Roundtable, December 2009, no. 4,
p. 4; CRA GST Roundtable, April 2016, nos. 8‑9, p. 25‑26;
and Blair Nixon & Vincent M. Bjorndahl, “GST and Business Trusts:
Filling the Gaps” (1996) 44:3 Canadian Tax Journal at 742.
[23]
In short, the Appellant states that, given the
unequivocal and longstanding CRA publications surrounding bare trust and
agencies, the Respondent’s assertion that the party named as in the APS purchaser
who, as in this case, never acquires an interest in land is inconsistent,
inequitable and unsettles a long held administrative perspective of the CRA.
[24]
Authorities also support this administrative
view. The Appellant referenced the following: Peragine v. R., 2012 TCC
348, which allocated a capital gain to a beneficial owner rather than the acquiring,
title-holding bare trustee; De Mond v. R., [1999] 4 C.T.C.
2007, where losses from real property were allocated to the beneficial owner
entitled to the profit rather than the acquiring, title-holding bare trustee; Cheema
v. R., 2016 TCC 251 (under appeal), where the Court that determined that ultimate
liability of a beneficial owner defeats a nominal legal interest of two joint
purchasers and title-holders, in respect of a GST new housing rebate; Javaid
v. R., 2015 TCC 94, where the Court held that a co-acquiring and
title-holding guarantor party was a mere agent and, therefore the principal
would satisfy the GST rebate conditions; and lastly, Samuel C. Young
Professional Corp. v. R., [2007] G.S.T.C. 13, where the Court recognized the
beneficial owner as the recipient of the supply and, accordingly, the acquiring
and title-holding “agent” purchaser was not required to remit GST.
b)
Reply Submissions
of Respondent
[25]
The Respondent asserts that plainly and simply,
Mayling was, during the entire period from execution until, and at, the closing
date, the party liable under the APS. As such, it was the recipient. The
contention that 840 Holdings, Bazis YYC or Plazacorp were recipients is
not legally possible; firstly, none of them were parties to the APS and none
became liable under the APS. This is borne out in the Appellant’s own notice of
appeal which never suggests any of these parties were the purchaser or party
obligated under the APS.
[26]
Further, the documentation is clear. The APS
obligates Mayling to self‑assess for and remit the HST. The APS contains
a paramountcy clause over ancillary documents and confidentiality provisions as
between the two parties. The APS was fully performed in accordance with its
terms. The mere direction of title provided to the Appellant directing title to
840 Holdings is neither legally or factually an assignment of Mayling’s
rights nor, more importantly, an assumption by 840 Holdings as a liable
obligant of Mayling’s obligations. Such an assumption of liability required the
written consent of both Mayling and the Appellant, the only parties to the APS,
to specifically amend its terms. This did not occur.
[27]
The Respondent contends the any assertion that Bazis
YYC was liable as a principal of an agency or beneficiary of a trust at the
time the supply arose, the date of the APS, is more remote. The same is true of
840 Holdings ability to have been an agent or trustee at that time. The reason
is simple. At the time of the APS’s execution, neither entity existed. The supply
legally arose at that time by virtue of section 133 of the ETA.
840 Holdings and Bazis YYC were never liable under the APS, the post‑facto
delivered trust agreement, statutory declaration and indemnity are suspect and,
moreover, irrelevant because neither Bazis YYC nor Plazacorp were recipients
under the APS. The evidence before the Court regarding Plazacorp’s capacity was
non-existent.
V. Issue
Refined
[28]
The sole issue, slightly refined is: who was the
recipient of the supply and the person liable under the APS to pay the purchase
price?
[29]
To this end, the Appellant characterizes 840 Holdings
as a bare trustee or agent acquiring or holding the Property through what has
been described almost interchangeably as a bare trust, naked trust or
undisclosed agency for either or both of Bazis YYC or Plazacorp. In so doing,
and for clarity, the Appellant does not suggest that Mayling, the legally
described purchaser, was any of the bare trustee, nominee or principal. This is
clear when the Appellant submits that 840 Holdings had acquired the Property in
trust as a bare trustee or nominee for Bazis YYC and/or Plazacorp the
(“Beneficial Owners”).
[30]
To slightly restate the basis of the appeal, for
the Appellant to succeed, the Court must find that neither Mayling, the described
purchaser under the APS, nor 840 Holdings, the “on-closing” directed
title-holder, was the recipient of the supply and bore the obligation to
complete the supply under the APS. In addition, given the sequence of who was a
registrant at closing, the Court must find that 840 Holdings was a mere bare
trustee, nominee or agent at the time of closing in favour of the Beneficial
Owners. In short, was there at that time a trust or agency in favour of Bazis
YYC and/or Plazacorp?
[31]
For the following reasons the Court cannot so
conclude.
VI. Analysis
and Decision
[32]
At the time the APS was executed, neither Bazis
YYC nor 840 Holdings existed. Factually, neither of the purported agent or bare
trustee nor principal or Beneficial Owner existed when the APS was executed. The
reasons which follow concerning the documentary evidence and intention of the
parties up until the closing date regarding the existence of a trust applies
equally to the concept of agency.
[33]
The suggestion that broad assertions made after
a subject transaction is closed, may transform a directed transferee, such as 840
Holdings, into a trustee, or Bazis YYC and/or Plazacorp into a beneficiary and
obligor under all of the APS, closing documentation or non-merging covenants is
neither factually nor legally correct in the absence of documentation.
[34]
All CRA publications direct and assume that
uncontroverted or, at least, predominant evidence concurrently existing at the closing
date need consistently reveal a trust (bare or otherwise) or, for that matter,
an agency relationship. The words “where a trust or where an agency exists” are
interlineated throughout these CRA publications. The following factual findings
in this case fail to approach an indication of such existence at or before the
closing date:
(a) there is no assumption by 840 Holdings or consent by
Mayling of anything approaching liability under the APS, the closing
documentation or land transfer tax affidavit: Lounsbury
Co. v. Duthie [1957] SCR
590 at paragraphs 13 and 14. At law, Mayling was not relieved of its
obligations under the APS by any identifiable document. Furthermore, the
Appellant is not asserting it was a beneficiary, but an agent and/or bare
trustee;
(b) there is no settlement or settling by Mayling of the
Property or the right to legally hold same upon 840 Holdings as a trustee or
agent for the alleged Beneficial Owners. As such, no documentation suggests
that anyone other than Mayling was liable to pay the consideration to the
Appellant or assume the leases: Y.S.I.’s Yacht Sales
International Ltd.
v. R.
, 2007 TCC 306
at paragraph 57 and Merchant Law Group
v. R.
, 2010 FCA 206 at paragraphs 12-14;
(c) the dated “as of August 30, 2012” Co-tenancy
Agreement and revamped statutory declaration and indemnity, contemporarily
produced for the first time after the reassessment was issued or threatened, are
given little weight for several reasons. First, there is no clear indication
when the “original co-tenancy agreement”, which the Co-tenancy Agreement
replaced, was actually executed or when temporally the Property was actually
settled upon the “trust”. Second, this document references nowhere within it
how 840 Holdings acquired is title, rights or assumed its obligations from
Mayling to, in turn, hold same for the Beneficial Owners. Consistently, Mayling
is neither mentioned in this document nor a signatory to it. Third, the
statutory declaration and indemnity of Bazis YYC are not dated on the date
fixed for closing, August 29, 2012, but on August 30, 2012. This indicates
these documents were executed and/or sworn post the actual closing date because
they employ the actual registration date. This date was unknown to the parties
when all effective closing documentation was otherwise prepared, executed and
delivered. This strongly suggests a subsequent intention and action
inconsistent with either Beneficial Owners being the recipient of the Property on
the closing date;
(d) further, all documentation delivered to effect the
closing on the closing date is equally as consistent, and is no more preposterous
with the conclusion that, at the time of closing, 840 Holdings became both
beneficial and legal owner of the Property or became a trustee or agent for the
beneficiary, Mayling. If either of these interpretive scenarios be true, then
the appealed assessment is still correct and the appeal shall fail. Factually,
neither Mayling nor 840 Holdings was ultimately a HST registrant at the closing
date. Quite apart from these alternative speculations, the fact remains that no
closing documentation indicates that anyone other than Mayling remained the
obligant to the Appellant under the APS at the time of its execution, during
the period leading up to its closing, at the time all other closing documents
were exchanged and at the closing date. Moreover, there is no documentation
executed or even memorialising, in advance or concurrently with closing, that
Bazis YYC or Plazacorp were obligants, beneficial owners or principals: Ritopecki v. Breslow Kantor Inc. et al., 1983 Carswell Ont 3429 at paragraphs 37 and 38. Is it the Appellant
who must satisfy itself based upon the documentation delivered to it at closing
as to the recipient of the supply and obligant under the agreement for supply at
the applicable time.
[35]
In conclusion, trusts (even bare ones) and
agencies (however cursory) are not aspirational constructs formed by imprecise
intention or inchoate plans: Baldasossarra v. MNR, 1990
CarswellNat 537 at paragraph 12 and Low v. HMQ, 1993 CarswellNat
996. This is especially true when the time for determination of the recipient
and obligant is fixed: the time the contract for supply arises and the closing
date. Section 133 of the Act makes this clear.
[36]
Moreover, cases where a bare trust or agency
have been found to exist, and are interpreted by CRA to exist, require some
documentary or evidential disclosure of the various parties to the supplier at
the time of supply. As an example, in GST new housing rebate cases, where the
Court has found that among named parties in an agreement of purchase of sale,
only one was the beneficial owner and the other a mere agent or bare trustee,
both such parties executed or were inextricably concerned with the document(s) creating
the supply and related obligations.
[37]
In the present case, none of Bazis YYC or
Plazacorp, the alleged Beneficial Owners and principals, nor 840 Holdings, the
alleged trustee or agent, executed the APS, was described in such capacity to
the Appellant or was reliably described in other contemporareous collateral
documents as such. These facts are clearly distinguishable from the facts in the
following authorities: Rochefort v. HMQ, 2014 TCC 34 at
paragraphs 11 and 24; Javaid v. HMQ, 2015 TCC 94 at paragraph 22;
Cheema v. HMQ, 2016 TCC 251 at paragraph 54 (as to documentation
only).
[38]
In summary, some inceptive documentation and
actual foundation is required to engage the assistance of the publications authored
by CRA, the authorities and, most importantly, the law of agency or trusts.
While either relationship need not be disclosed or extensively documented, either
relationship must be factually reflected during the relevant time in some effective
form to fulfill their respective legal elements: Canpar Developments Inc.
v. HMQ, 2011 TCC 353 at paragraphs 8 and 9 (as to trusts); Y.S.I.’s
Yacht Sales, supra, at paragraphs 41 through 49 (as to agencies).
Similarly, the vendor of commercial real property, such as the Appellant in respect
of the Property, is required to ascertain at that relevant time: i) who is the
recipient within the meaning of the ETA; ii) and whether the recipient
is a registrant in order to relieve itself, as supplier, of the obligation of
collecting the HST on the supply. Where the ostensible recipient, the person
obligated to pay the consideration, is named in the APS as “purchaser”, then
something more concurrent with closing than a one page unilateral direction regarding
title is necessary to dislodge the countervailing, mutual agreement, patent
facts, logical conclusions and legal obligations in the APS.
[39]
The documentation in this case need not have
been onerous or complex. A one or two page assignment and assumption agreement,
a simple declaration of trust or co-execution of the APS as between Mayling and
840 Holdings. A then current and accurate disclosure of the Beneficial Owners
as obligants would also have gone a long way. None of these documents were
requested by the Appellant or given by Mayling, 840 Holdings or the Beneficial
Owners on or before the closing date. As a result, there is simply no factual,
documentary or deductive basis to conclude that the Appellant ought to have
concluded any party other than Mayling was the recipient of the supply at the closing
date. In summary, the conditional words, “where a trust or where an agency
exists” do not apply to this appeal.
[40]
Mayling remained the purchaser until closing
and, as such, obligated to pay the consideration. This satisfies the definition
and conditions for the recipient to collect and remit the HST under the ETA provided
Mayling was a registrant. It was not. Therefore both the ETA and APS
required the Appellant to collect and remit the HST. It did not. The
reassessment is therefore correct.
[41]
Beyond this conclusion, there is nothing factually
to suggest that at or before the closing date, the asserted Beneficial Owners,
Bazis YYC or Plazacorp were considered by the Appellant as obligated to pay the
consideration or face suit for failure to do so. This is consistent with all
testimony at the hearing which revealed no HST Registry searches were done before
the closing date by the Appellant against either of Bazis YYC or Plazacorp as a
possible recipient until after the reassessment.
[42]
The appeal is accordingly dismissed with costs
awarded to the Respondent in accordance with the applicable tariff subject to
representations in writing by either party within 30 days of the date of this
judgment.
Signed at Ottawa,
Canada, this 31st day of January 2017.
“R.S. Bocock”
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