Agency

An employment bureau (Adecco) introduced temporary staff ("temps"), who were not Adecco employees, to clients looking for a temporary worker to undertake an assignment, and if the temps accepted an assignment, Adecco paid them for the work they did for the clients – and collected those amounts plus a mark-up from the clients.

Newey LJ essentially found that Adecco was not paying the temps as agent for the clients, so that the full consideration received by it from the clients was subject to VAT rather than just the “commission” earned by it.

It was helpful to Adecco’s case that it could not direct the temps as to how to carry out their assignments, had no effective control over when the assignments ended and did not conduct any appraisals of the temps. However Newey LJ noted that there was no contract between the temps and the clients, the contracts referred to their services being provided "through Adecco," and Adecco charged a single sum for each hour worked rather than breaking out the commission portion.

Various companies in Quebec whose function it was to promote commercial development, or cultural, sporting or tourist activities, in their respective municipalities, were found to be subject to a higher rate of employer health tax because they were an agent (“organisme mandataire”) of a Canadian municipality.

Notwithstanding that this was a Quebec case, Quenneville JCQ determined this question by essentially applying the common law function and control tests for determining crown agency (referencing “the nature and degree of control that the Crown exercises over the entity” (para. 58)). She noted that the municipalities themselves considered that they controlled the companies, in most cases a majority of the company’s board was named by the municipality or chosen from among a list proposed by the municipality, their budgets were approved by the municipal Councils, they received much of their financing from the municipalities and their activities were integrated with those of the municipalities. Quenneville JCQ stated (at para. 167, TaxInterpretations translation):

It is important to emphasize that it is not actual control which must be considered, but rather the potential for the municipality to exercise such control.

A U.S. manufacturer of recreational vehicles (Jayco) was found by D’Auray J to have delivered or made available the RVs to its Canadian dealers at its facility in Indiana, so that their supply occurred outside Canada and was not subject to GST/HST. Notwithstanding a statement in the Dealership Sale Service Agreements that neither party was “the agent … of the other for any reason,” she found that, in fact, Jayco arranged for the carrier (a Jayco subsidiary) to ship the RVs to Canada on behalf of the dealers rather than of it. In this regard, she stated that a statement in the Dealership Sale Service Agreements that neither party was “the agent … of the other for any reason” had “to be interpreted in its context” (para. 116) and, in fact, Jayco acted on the dealers’ behalf in arranging delivery.

The taxpayer had delegated the handling of all her affairs to her husband, and did not find out about a purported income distribution by a trust to her until over seven years later, at which point she promptly executed a disclaimer of any interest in the distribution. The Court found that she should be imputed with the knowledge of her agent (her husband), so that she had not promptly disclaimed - so that if (contrary to the finding above) the income distribution to her had otherwise been valid, her purported disclaimer thereof would have been ineffective. In this regard, the Court stated (at para. 139):

In the current edition of Bowstead, namely Watts P and Reynolds FMB, Bowstead & Reynolds on Agency (20th ed, 2014), the relevant ‘rules’ are set out in Arts 94 and 95. We note that the rule corresponding to the second rule set out above is expressed in less absolute terms [than in the previous edition]: “The law may impute to a principal knowledge relating to the subject matter of the agency which the agent acquires while acting within the scope of his authority” (art 95(1)). This revised formulation accommodates the flexibility that is required, given the different legal contexts in which the principles of attribution may operate.

An individual (Kwong) and his ex-wife (Yu-Lian), who lived along with their daughter in Vancouver, got the younger sister of Yu-Lian (Qun) to purchase a new house in the Markham area for their daughter to live at while she attended university at U of T. Although Qun was named in the purchase agreement and in the application for the Ontario new home rebate application, all the funds for the purchase came from Kwong and Yu-Lian, Kwong took title to the property and the rebate was credited against the purchase price paid by him at closing.

Russell J found not only that Qun’s role in the purchase transaction was as agent for Kwong and then found (at para.35) that:

The Rebate application was not made by Qun…on her own behalf but rather by her in her capacity as agent for…Kwong… .

Qun’s appeal was allowed - rather than being dismissed on the basis that the rebate instead belonged to Kwong (before giving effect to its assignment to the builder), without any explicit indication that Qun was considered to have also appealed as agent.

The taxpayer held two commercial rental buildings which formed part of a 16-building common–law strata complex. The buildings were the subject of a co-tenancy agreement between all of the owners. Paris J accepted that a corporation (“SVO”) had agreed to manage all of the buildings as well as the common areas as agent for all of the owners, notwithstanding that the taxpayer was only able to provide an unsigned copy of the management agreement – and also accepted that a parking area had subsequently been acquired by SVO as their agent notwithstanding the failure to locate any written agreement to this effect.

Paris J found (at para. 13) that SVO did not have any discretion, independent power or control over the parking area that would negate existence of a bare trust and that the operation of the parking area was subject to the control of the owners.

Consistently with a passage quoted from Scott, The Law of Trusts in De Mond that:

If [a person] undertakes to act on behalf of the other and subject to his control he is an agent; but if he is vested with the title to property that he holds for his principal, he is also a trustee. In such a case, however, it is the agency relation that predominates, and the principles of agency, rather than the principles of trust, are applicable.

Paris J stated (at para. 15):

[T]he agency relationship between SVO and the owners, including the Appellant, predominates and… SVO was acting as the owners’ agent in entering into the contracts for maintenance and upkeep of the building exterior and common areas including the parking areas.

Accordingly, the taxpayer was entitled to input tax credits respecting expenses incurred by SVO as its agent.

The appellant was incorporated to perform renovation work on a Vancouver building owed by a corporation (0781178 BC Ltd.) whose shareholder was a friend of its sole shareholder. It was agreed that the appellant would earn a management fee equal to 15% of the renovation costs incurred by it. CRA assessed the appellant on the basis that it had not incurred the renovation costs as agent for 0781178 BC Ltd., so that it should have charged GST on such costs in addition to on its management fee.

In confirming the assessment, Ouimet J stated (at para. 46):

I was not presented with any evidence indicating that, by its actions, 0781178 BC Ltd. had implicitly accepted an agency relationship with respect to the renovations. The circumstances of this case do not clearly indicate that 0781178 BC Ltd. gave authority to Persepolis Inc. to act on its behalf.

The appellant (“GEM”) incorporated three new subsidiaries (the “Owners”) to each acquire a newly-constructed nursing home, and arranged for the requisite land to be conveyed to each subsidiary. The contracts with the general contractor and architect were entered into by both GEM and the owner. CRA assessed GEM on the basis that its construction services division was providing construction services to the Owners, whereas GEM considered that it was contracting as agent for the Owners.

In upholding GEM’s position, Sommerfeldt J first quoted (at para. 24) the statement in Merchant Law that “for an agency relationship to exist the agent must be able to affect the principal’s legal position with third parties by entering into contracts on the principal’s behalf or by disposing of the principal’s property,” and then stated (at para. 53):

I have not seen anything to indicate that the Contractors first transferred title to their respective materials to GEM, and that GEM subsequently transferred title to those materials to the three Owners. Rather, it appears to me that title to the materials passed directly from the Contractors to the respective Owners pursuant to the principle of accession, when those materials were appropriated and incorporated into the respective nursing homes. Thus, it seems that GEM affected the legal position of the Owners with the Contractors.

In addition, Sommerfeldt J dismissed the Crown’s submission that the transfer of title to the materials occurred by reason of the deeming effect of s. 191(3) of the ETA, stating (at para 49):

[T]hat provision applies only for the purposes of Part IX of the ETA… [and] cannot form the basis pursuant to which title to the materials passed from the various Contractors to [the Owners]. … .

Furthermore, the fact that GEM initially booked the relevant costs on its books did not alter the reality that the benefit of such costs accrued directly to the owners. Sommerfeldt J concluded (at para 88):

… [T]o the extent that GEM supervised or managed the development and construction of the nursing homes, it did so as agent for and on behalf of the three Owners. … GEM, as principal, did not supply construction services to the Owners.

The availability of the new housing GST/HST rebate to the taxpayer under ETA s.254(2) turned on him or his spouse being the only person who was “liable” under the purchase agreement. CRA denied the rebate on the basis that a friend of the taxpayer had acquired an undivided 1% interest in the property (as a result of requirements of the mortgagee), even though, on the date of closing, the friend executed a declaration of bare trust in favour of the taxpayer and his wife.

In finding that the requirements for the rebate were satisfied, Smith J stated (at para. 54):

The notion of a bare trust as an agency relationship…is well known and well established…. For tax purposes, a bare trust is considered a non-entity in the sense that a beneficiary as principal, is considered to deal directly with property through the trustee as agent or nominee.

A Canadian Intrawest corporation and affiliated U.S. entity (the “Canadian Developer” and “U.S. Developer, respectively”) transferred individual resort condos (the “Vacation Homes,” which they had acquired in Canada, the U.S. and Mexico) to the Appellant (which was a non-share corporation resident in Canada) in consideration for the Appellant transferring occupancy rights to the Vacation Homes, in perpetuity to them. The Canadian Developer and the U.S. Developer then sold “Resort Points” to members of the public in Canada and the U.S. (the “Canadian Resort Point Purchasers” and “American Resort Point Purchasers,” respectively – who also thereupon became member of the Appellant, along with the Canadian and U.S. Developer) which could be periodically applied under a booking system to obtain access to particular Vacation Homes at specified times.

The Appellant paid various expenses respecting the Vacation Home operations which it recovered through “Annual Resort Fees” charged to its members. In rejecting the Appellant‘s submissions that the Annual Resort Fees represented reimbursement for expenses incurred by the Appellant as agent for its members (so that they were not subject to GST), D’Arcy J accepted that an agency characterization would have been assisted if the Appellant had established that the beneficial interests in Vacation Homes were held by the Appellant on behalf of its members, but found that this was not established given inter alia that the risk of damage to the property through fire, misconduct of the users or normal wear and tear rested with the Appellant and the Resort Points represented only contractual rights to make reservations rather than being interests in the Vacation Homes. Furthermore, agency was not established given that there was nothing amounting to an agency agreement, and brief references in two of the posited agreements (one of which, the Appellant was not party to) respecting the incurring of expenses by the Appellant as agent for the members were contradicted by the agreements’ other terms. Furthermore, the items included in the Annual Resort Fees’ calculation included internal costs such as of the Appellant’s annual meeting and its auditor. Finally, the members’ control of the Appellant through their ability to elect its board did not mean that the Appellant acted as their agent.

A Quebec LP (SNF) acquired metal scrap from 12 suppliers, who were registered for GST purposes, but who did not remit the GST which they invoiced to SNF. Each supplier named in the invoices was “a ‘prête‑nom’ and not the actual supplier” (i.e., each supplier acted on behalf of an undisclosed principal). Rip J stated (at paras. 52-53):

The Supreme Court of Canada has confirmed that the "prête-nom" contract is a lawful form of the contract of mandate: Victuni A.G. v. Minister of Revenue of Quebec, [1980] 1 S.C.R. 580 at 584. However, in St‑Jules c. Roy, the Superior Court found that using a "prête‑nom" is void if the purposes of the contract were illicit and caused harm to a third party.

Since a "prête‑nom" contract is a valid contract, the question then is whether the "prête‑nom" is an intermediary of the true supplier whose name may appear on the documentation supporting the supply:

On this latter issue, he concluded (at para. 81):

That…suppliers may not have carried on a business or were "prête‑noms" does not, on the facts, affect the appellant's right to claim ITCs.

On December 31, 1993, the taxpayer and 21 other signatories to a joint venture acquired rights to exploit seismic data. Under the terms of the joint venture agreement, no nominees were permitted, but in fact various of the purchasers were acquiring their rights on behalf of others (totalling 30) who also claimed Canadian exploration expense deductions for "their" share of the seismic expenditures. Favreau J stated (at para. 80) that this:

is not an indication of a sham. It is rather an indication that some persons were not legally members of the Joint Venture and were not entitled to the deductions. The Minister should have simply denied those person the tax deductions… .

The appellant operated a small grey market business to buy iPhone 4 units from Apple's Canadian retail channels and resell them in Hong Kong, where they were not yet available. Friends and family members (the "buyers") would purchase one or two phones each, for which the appellant fully reimbursed them. The Minister denied the appellant's input tax credit claim for the HST incurred by the buyers on the basis that they were not its agents (and also on the basis of inadequate documentation).

Bocock J found that the buyers were not the appellant's agents as they did not have the authority to bind it. Apple's terms of sale prohibited buying phones for resale - that is, Apple would never have entered into the sales contracts directly with the appellant. Bocock J stated (at para. 17):

[A] principal cannot appoint an agent to engage in a contractual entreaty [sic] into which the principal has no legal capacity or authority to enter: 1524994 Ontario Ltd. v. Canada, 2007 FCA 74 at paragraph 18.

The appellant ("Med"), which marketed hotel accommodation in the Mediterranean and the Caribbean through a website, required a customer to pay the whole of the agreed sum before arriving at the hotel, and Med only paid the hotel a lower sum for the holiday after it had ended pursuant to an accommodation agreement in which it was styled as agent. Med was required to charge U.K VAT on the sums collected by it unless it acted solely as an "intermediary," which the court found to be essentially the same as an agent.

Before concluding that Med was not required to collect VAT, Lord Neuberger found that Med was providing accommodation as an agent for the hotels, notwithstanding that Med:

• failed to account to the hoteliers for cancellation charges and interest on the amounts deposited (which Lord Neuberger stated, at para. 44, might represent a breach of the agency agreement or reflect Med's relative bargaining position)
• dealt with matters of complaint and compensation in its own name and without reference to the hotelier (but with any compensation ultimately recovered from the hotelier)
• treated the deposits as its own money
• reserved rooms in advance of sales (although the related payments were recoverable against the next season's revenues if the current season's bookings were insufficient)

iArchambault J found that s. 160(1) did not apply to the transfer of funds to the taxpayer by a friend of its shareholder as they had a mandator-mandatary relationship.

Although it was unnecessary to decide whether the parties were at arm's length, Archambault J suggested that they were. The friendship was likely not enough to constitute a non-arm's length relationship given the mandatary relationship. Archambault J stated ( at para. 83):

Under such circumstances, there is no reason to be concerned with the concept of non-arm's length relationship because, by definition, a mandatary must always follow his mandator's instructions and because, for income tax purposes, no transfer has been made between the mandator and the mandatary.

The taxpayers' former counsel had reached a settlement agreement with the Minister under s. 169(3), which provides that the Minister may reassess a taxpayer with the taxpayer's written consent. After dismissing the taxpayers' argument that they had not authorized counsel to reach a settlement, D'Auray J. dismissed the taxpayer's alternative argument that, because s. 169(3) requires written consent from the taxpayer, and the Minister only received written consent from counsel, the settlement could not be enforced under s. 169(3). D'Auray J. stated (at para. 76):

In my view, the consent in writing can be given by the counsel of record.

The taxpayer paid royalties under a sub-licensing agreement with an affiliated Netherlands corporation ("VHBV") which, in turn, had been licensed the intellectual property by the holder, which was VHBV's Netherlands parent ("VIBV"). Under the licensing agreement, VHBV paid 90% of the royalty fees earned by it from the taxpayer to VIBV.

After finding that VHBV was, under Article 12 of the Canada-Netherlands Convention, the "beneficial owner" of the royalties paid to it, Rossiter A.C.J. rejected the Minister's further argument that VHBV collected the royalty fees as an agent of VIBV. Evidence showed that, legally and practically, VHBV had considerable discretion in how to spend its share of the royalties and when to send VIBV's share. Moreover, there was no evidence that VHBV had the power to alter VIBV's legal position in any respect.

Seeking to protect herself from being sued by her brother, the taxpayer transferred title to all her real properties for no consideration to corporations under her majority control. She reported rental and business income and expenses from these properties while her accountant did the same in the corporations' returns. The Minister's reassessment included in the taxpayer's income a taxable capital gain from her transfers to the corporations, and gross negligence penalties.

Hogan J. found that the taxpayer had retained beneficial ownership of the properties, and that the corporations held the properties under an implied agency agreement. Following the transfer, the taxpayer continued to operate the business properties in a personal capacity. All invoices for repairs and renovations, and all rent cheques were addressed to her personally, and all income and expenses went into or came from her personal bank accounts. She also held the mortgage obligations in 2003 and 2004. She transferred the mortgages to one of the corporations in 2005 but became a guarantor. The corporations held themselves out as owning the property in limited instances, but in totality the taxpayer's and corporations' conduct supported finding an agency relationship.

The appellant, which provided bulk mail processing services, was found to have purchased postage and mailed materials with its clients' authority, so that it did so on their behalf. Accordingly, the postage paid by it was 0-rated consideration.

Woods, J. accepted that an agreement pursuant to which the appellant ("YSI") agreed to contract with suppliers in connection with refurbishing a yacht and to charge the other party to the contract ("Platinum") a 5% mark-up on some of the purchases, did not establish an agency relationship between YSI and Platinum. Woods, J. noted (at para. 35) that whether YSI acquired goods and services on its own behalf on depended on the parties' mutual intention and that, accordingly, the essential question was whether Platinum agreed to be bound by YSI's agreements with suppliers.

The taxpayer was unsuccessful in establishing that its vice president did not have authority to sign a waiver on its behalf. He had the ostensible authority to do so given that the taxpayer had allowed him to represent himself as the person in charge of tax-related matters, and he also had the implied authority to sign given that he was one of the two people who ran the business and was the one who had chief responsibility for corporate administrative and tax matters.

Before going on to find that dancers engaged by the Royal Winnipeg Ballet should be viewed as self-employed rather than employees given that it was the understanding of the parties that the dancers were independent contractors, Sharlow J.A. referred to Montreal v. Montreal Locomotive Works Ltd., [1947] 1 DLR 161 (PC) as a case in which a determination as to whether a manufacturer was agent for the Crown was determined by a search for the common intention of the parties.

The taxpayer unsuccessfully contended that there was a secret verbal contract between it and a related individual to whom it sold shares that he would hold such shares as nominee for it, so that a gain on a subsequent sale of those shares was realized by it rather than him. The fact that he received and included in his taxable income a dividend paid on the shares immediately before the sale to the third parties, and a representation contained in the notice of objection of the taxpayer, were inconsistent with this contention.

The Appellant (“Key”) provided the services of its employees to 30 or more affiliated owners of rental properties and remitted all the source deductions on their salaries. In accepting that the various apartment superintendents were employed directly by the owner companies, Bowie J. accepted that the arrangements had intended to be structured in this manner and noted (at p[ara. 8) that although they received letters of confirmation of employment on Key’s letterhead:

An agent may contract on behalf of a principal whose existence is not revealed to the other party.

However, Key directly employed the maintenance workers:

[N]either the agent nor the principals could say with any certainty at the beginning of any given week which company would employ the worker during that week, or when, or for how long. There is simply too much uncertainty about all of these matters to characterize the relationship between the workers and the various owners as thirty or more separate contracts of employment. (para. 13).

The registrant was a wholesaler of products to independent retail pharmacies operating under the "I.D.A." name, and also provided franchisor-like services to them. One such service was to negotiate favourable terms with various banks for credit and debit card services. When a customer made a purchase from an IDA member, the bank would deposit the amount (which it debited to the customer's account) into the registrant's bank account, and the registrant would transfer the full amount of the funds to the member's bank account. However, as the bank charged its "discount fees" to the registrant's account, the registrant in turn debited the members for these amounts - which Bowie J found represented a reimbursement for such fees which it had incurred as the members' agent.

Bowie, J. found (at para. 12) that in paying such charges and so debiting the members, the registrant "acted as the agent of the members for the purpose of making the payments on their behalf to the banks."

The registrant served retail travel agencies by booking and purchasing airline tickets for the agencies' customers, which resulted in the receipt by it of commissions from the airlines. Where the retail agencies had no agreement with the issuer of the customer's credit card, the registrant would act as the "merchant" insofar as the credit card issuer was concerned, so that the voucher amount for the ticket was advanced to it, with that amount being used by the registrant towards the cost of the ticket. In those situations, the registrant charged $15 per ticket to the retail agency to cover the charge of 2% to 3% by which the credit card issuer discounted the amounts which it paid to the registrant.

Before finding that this $15 charge was consideration for a financial service, Archambault J rejected (at para. 22) a submission of the registrant that it claimed payment from the credit card issuers as mandatary of the retail agencies:

It was not established that Skylink had agreed with the retail agencies that it would act as their mandatary by requesting payment from the issuers. Nor is there any evidence that Skylink informed the issuers that it was acting as the retail agencies' mandatary.

The taxpayer's subsidiary ("CBL") transferred leasing assets to a partnership between CBL and two subsidiaries of a third party that was interested in acquiring those assets ("CCM" and "693396") in consideration for a partnership interest, an election was filed under s. 97(2), the taxpayer acquired the partnership interest of CBL on a winding-up of CBL pursuant to s. 88(1) and the taxpayer sold the partnership interest to 693396 and an affiliate of 693396.

In rejecting a Crown submission that the taxpayer was an agent of CBL for the purpose of transferring the leasing assets to the third party of its subsidiaries, Bowman TCJ. stated (at p. 1869):

"Generally speaking, it requires extremely compelling evidence for one company - even a subsidiary - to be regarded as an agent of another ... . It is even more difficult to regard a parent as its subsidiary's agent."

A dealer was found to acquire musical equipment from members of the public for resale as their agent in accordance with the description of the arrangement as an agency one in the relevant agreement notwithstanding that the dealer had the power to effect all necessary repairs to the equipment before sale.

The taxpayer, who received and exercised stock options as a "nominee" for a partnership, was held to be their agent rather than a trustee.

"I find it extraordinary that the respondent Minister would contend, through counsel, that Eaton's, as a statutory agent, would have a higher obligation to its principal than as an agent under the usual principal and agent agreement. Eaton's, as a vendor, is obligated by statute to collect and remit the sales tax but, after exhausting all reasonable means to recompense itself, I can see no reason why it, as the agent, should bear the loss rather than its principal, the respondent Minister."

A commercial gallery successfully argued that it was selling pottery as agent for some potters, rather than as principal. Anything which the potters were paid by the gallery prior to a sale was successfully characterized in the agreement as "remittances prior to sale", i.e., pre-payment deposits, rather than as sale proceeds. Deficiencies of an administrative character in the agreement were not crucial.

A contract entered into by a corporation which held lands as "bare nominee and trustee" for six "beneficiaries" gave rise to liability for those beneficiaries.

Although "a trustee, who is acting as a trustee...cannot subject the beneficiaries to liability" (p. 75), here, as the corporation was acting under a duty of obedience to the beneficiaries, it was a bare trustee, so that the principles of agency rather than of trust predominated respecting the question of the liability of the beneficiaries. Morden JA quoted (at pp. 73-74) with approval a statement in Scott, The Law of Trusts, 4th ed., at 95 (1987):

A person may be both agent of and trustee for another. If he undertakes to act on behalf of the other and [be] subject to his control he is an agent; but if he is vested with the title to property that he holds for his principal, he is also a trustee. In such a case, however, it is the agency relation that predominates, and the principles of agency, rather than the principles of trust, are applicable....

In finding that employees of a parent corporation whose services were provided to a subsidiary had not been retained by the parent as agent for the subsidiary, Slade L.J. noted that only the parent was entitled to enforce the relevant service contracts because the employees had never agreed to serve the subsidiary.