Glencore v. FTI – BC Court of Appeal finds that a recipient could not set off HST owing by it to a supplier (who never remitted that HST) against a debt owing by the supplier to it

Glencore relied on a set-off clause in the long-term metals supply contract between it and an arm’s length mining company (“TNB”) to pay amounts (including HST) owed by Glencore to TNB for such TNB metals supplies by way of set-off against most of the amount owed by TNB to Glencore for “Replacement Costs” incurred by Glencore due to TNB’s failure to make earlier deliveries under the contract. After TNB has gone into CCAA proceedings, CRA assessed TNB for its failure to remit the HST which Glencore had purported to pay to TNB by way of set-off.

Fisher JA, after referring to the requirement of TNB to collect HST as agent for CRA under ETA s. 221(1) and to remit it to CRA under s. 222(1), indicated that he saw no error in the judge's description of the HST as a debt owed by the recipient (Glencore) to CRA, which the supplier collected on behalf of CRA as agent. Furthermore, s. 224 did not deem Glencore to owe the HST to TNB in its personal capacity because TNB had not paid such tax to CRA.

Because TNB owed the Replacement Costs to Glencore in its personal capacity, whereas Glencore (given the non-application of s. 224) continued to owe the HST at issue to TNB in TNB's capacity of trustee, there was no mutuality necessary for legal or equitable set-off to occur.

Since Glencore had not paid the HST, the judge had appropriately exercised her discretion under s. 11 of the CCAA to order Glencore to pay the HST to TNB as CRA's agent. It did not matter that, pursuant to s. 222(1.1), TNB was no longer deemed to hold any HST collected in trust for CRA after the commencement of the CCAA proceedings – so that this order allowed the receiver to receive such funds and distribute them among the creditors in accordance with the CCAA.

Neal Armstrong. Summaries of Glencore Canada Corporation v. FTI Consulting Canada Inc., 2026 BCCA 167 under ETA s. 221(1) and s. 224.