Curragh Inc. v. The Queen, 94 DTC 1894, [1995] 1 CTC 2163 (TCC)

Mogan J.T.C.C.:—Under the terms of a 49-page agreement dated May 15, 1987, the appellant borrowed $35,000,000 from Giant Resources Ltd., a company incorporated in the state of Queensland, Australia. Interest on the loan was payable monthly in arrears on the first day of each month. The first payment of interest on the loan was due on July 2, 1987. Immediately prior to that payment, the appellant was asked by Giant Resources Ltd. (referred to herein as "Giant") to make interest payments on the loan "until further notice" to 654922 Ontario Inc. at its account number 602441 at ANZ Bank Canada in Toronto. Throughout the period July 1987 to December 1988, all monthly payments of interest (except for January and March 1988) were made by the appellant to 654922 Ontario Inc. (referred to herein as "No. 922") in accordance with that request.

No. 922 was incorporated under the laws of Ontario as a wholly-owned subsidiary of Giant. In a separate transaction, No. 922 had advanced $22,000,000 to the appellant to acquire a 46 per cent shareholder equity in the appellant. The documents with respect to this $22,000,000 advance were not entered in evidence but Ian Shaw, a senior officer of the appellant, testified and stated that Giant had invested $22,000,000 in the appellant to acquire a 46 per cent equity position and that No. 922 held the 46 per cent stake in the appellant on behalf of its parent corporation, Giant. The $22,000,000 investment by Giant in the appellant (through its subsidiary No. 922) was also corroborated in certain memoranda (Exhibit A-15) prepared by Arthur Andersen & Co., the auditors, outside accountants and tax advisors of Giant.

When making payments of interest on the $35,000,000 loan to No. 922, the appellant did not withhold any tax under Part XIII of the Income Tax Act, R.S.C. 1952, c. 148 (am. S.C. 1970-71-72, c. 63) (the ’’Act”) because No. 922 was a resident of Canada. For the month of January 1988 when interest on the loan was paid directly to Giant in Australia and not to No. 922, the appellant withheld and remitted 15 per cent tax ($50,162.67) under Part XIII because Giant was a non-resident of Canada. The interest on the loan for March 1988 was paid directly to Giant but no 15 per cent tax was withheld. Mr. Shaw referred to this March payment as an error. By notices of assessment dated August 23, 1990; July 31, 1991; and December 12, 1991; the Minister of National Revenue assessed tax, interest and penalty for the 1987 and 1988 taxation years on the basis that the appellant had failed to deduct and remit a tax of 15 per cent on interest paid with respect to the $35,000,000 loan. The relevant amounts taken from the most recent (December 12, 1991) notices of assessment are as follows:

The Minister is attempting to collect the amounts in lines D, E and F. There is no dispute concerning the above arithmetic. The only dispute is whether the appellant was required to deduct and remit the 15 per cent tax on interest payments made to No. 922. The relevant provisions of the Income Tax Act are as follows:

212(1) Every non-resident person shall pay an income tax of 25 per cent on every amount that a person resident in Canada pays or credits, or is deemed by Part I to pay or credit, to him as, on account or in lieu of payment of, or in satisfaction of,

(b) interest....

215(1) When a person pays or credits or is deemed to have paid or credited an amount on which an income tax is payable under this Part, he shall, notwithstanding any agreement or any law to the contrary, deduct or withhold therefrom the amount of the tax and forthwith remit that amount to the Receiver General on behalf of the non-resident person on account of the tax and shall submit therewith a statement in prescribed form.

215(2) Where an amount on which an income tax is payable under this Part is paid or credited by an agent or other person on behalf of the debtor either by way of redemption of bearer coupons or warrants or otherwise, the agent or other person by whom the amount was paid or credited shall, notwithstanding any agreement or law to the contrary, deduct or withhold and remit the amount of the tax and shall submit therewith a statement in prescribed form as required by subsection (1) and shall thereupon, for purposes of accounting to or obtaining reimbursement from the debtor, be deemed to have paid or credited the full amount to the person otherwise entitled to payment.

215(3) Where an amount on which an income tax is payable under this Part was paid or credited to an agent or other person for or on behalf of the person entitled to payment without the tax having been withheld or deducted under subsection (1), the agent or other person shall, notwithstanding any agreement or law to the contrary, deduct or withhold therefrom the amount of the tax and forthwith remit that amount to the Receiver General on behalf of the person entitled to payment in payment of the tax and shall submit therewith a statement in prescribed form, and he shall thereupon, for purposes of accounting to the person entitled to payment, be deemed to have paid or credited that amount to him.

215(6) Where a person has failed to deduct or withhold any amount as required by this section from an amount paid or credited or deemed to have been paid or credited to a non-resident person, that person is liable to pay as tax under this Part on behalf of the non-resident person the whole of the amount that should have been deducted or withheld, and is entitled to deduct or withhold from any amount paid or credited by him to the non-resident person or otherwise recover from the non-resident person any amount paid by him as tax under this Part on behalf thereof.

227(8) Any person who has failed to deduct or withhold any amount as required by this Act or a regulation is liable to pay to Her Majesty

(a) if the amount should have been deducted or withheld...under section 215 from an amount that has been paid to a person not resident in Canada, ten per cent of the amount that should have been deducted or withheld, and

The tax of 25 per cent in paragraph 212(l)(b) is reduced to 15 per cent under Article 11 of the Canada-Australia Income Tax Convention (1980).

The appellant put forward two basic arguments to support its position that the assessments should be vacated. First, the loan had been assigned by Giant to No. 922 (a resident of Canada) and any interest payment made to No. 922 was received by it on its own behalf as assignee of the loan. And second. if the loan was not assigned by Giant to No. 922, then any interest payment made to No. 922 was received by it as agent for Giant and, under subsection 215(3) of the Income Tax Act, it is only the agent of the nonresident who is required to withhold and remit the tax.

The first issue to be decided is whether the loan was assigned by Giant to No. 922. At the hearing of this appeal, no person testified as an officer, director or other representative of Giant or No. 922; and there was no document entered in evidence as an assignment or transfer in which Giant purported to assign the loan to No. 922. Counsel for the appellant relied on the concept of equitable assignment and cited the following passage from Halsbury's Laws of England (Fourth edition, volume 6, page 23):

No form of words is required for an equitable assignment; the only thing that is necessary is to make the meaning plain. The assignment may be by word of mouth, unless in the particular case writing is required by law, and no particular form of words is necessary so long as the words clearly show an intention that the assignee is to have the benefit of the chose in action. There must, however, be some act by the assignor showing that he is passing the chose in action to the supposed assignee.

Counsel also cited the following statement from Snell’s Equity (29th edition, 1990, page 79):

An equitable assignment made between the assignor and assignee is complete and binding even if no notice is given to the debtor.

The appellant relies on the following evidence to show a clear intention on the part of Giant that No. 922 was to have the benefit of the loan. Firstly, Exhibit A-4 is a letter dated July 2, 1987 from Giant to the appellant which states:

It would be appreciated if the payment of interest to Giant on the Giant- Curragh C$35,000,000 loan could be made to the following account, until further notice.

Account name: 654922 Ontario Inc.

Bank:

ANZ Bank Canada

18th Floor, North Tower

Royal Bank Plaza

Toronto, Ontario MSJ 2J3

Attention: John Buckley, General Manager

Account Number: 602441

Thanks for your assistance in this matter.

This letter refers only to interest on the loan and not to principal but it is a clear direction to the appellant "until further notice". Secondly, when the loan was repaid, most of the principal went directly or indirectly to No. 922. And thirdly, certain memoranda prepared by Arthur Andersen & Co. (Exhibit A-5) indicate that Giant’s total investment of $57,000,000 in the appellant may have been held by No. 922.

The letter of July 2, 1987 from Giant to the appellant (Exhibit A-4) could have been written only by the owner of the loan. That letter gave directions with respect to the payment of interest "until further notice" and it was silent concerning payment of principal. In January 1988, the appellant was instructed to make that monthly interest payment to Giant in Australia and it was only after further discussions with Mr. O’Neill (an officer of Giant) in January 1988 (Exhibit A-7) that it was decided that subsequent interest payments should go to No. 922. It is worth noting that the loan is referred to in Exhibit A-4 as the "Giant-Curragh loan"; it is not called the "654922-Curragh loan".

The appellant’s internal accounting records (Exhibit A-13) for 1987 and 1988 consistently refer to payments of interest on the loan as being "interest on Giant loan". There was a subsequent agreement of December 8, 1988 (Exhibit A-8) settling the terms for paying the remainder of the principal. In that agreement, the appellant agreed to pay Giant a sum of $10,000,000. And Appendix A to that agreement was a form of promissory note in which the appellant promised to pay to Giant the principal sum of $24,700,000. Among the loan transaction documents (Exhibit A-9) are two cheques dated December 14, 1988 in the aggregate amount of $10,000,000 both issued by the appellant and made payable to Giant. And finally, in February 1989, when there was only $14,700,000 owing on the loan, there is a letter of February 10, 1989 from Giant to the appellant (Exhibit A-10) instructing the appellant to pay $7,700,000 to No. 922 and to pay $7,000,000 to ERG Resources Inc. (another corporation affiliated with Giant).

A partner from Arthur Andersen & Co. testified and identified a number of internal memoranda which raised questions concerning the tax consequences of Giant’s $57,000,000 investment in the appellant. Questions like the following. If the $35,000,000 loan were held by No. 922, would interest on the loan be taxed under Part I in the hands of No. 922 or would there be offsetting interest payable by No. 922 to Giant to avoid the Part I tax? If No. 922 were required to pay interest to Giant to avoid Part I tax, would that interest attract Part XIII tax? If interest payable by No. 922 to Giant would attract Part XIII tax, why not pay the interest directly from the appellant to Giant? In summary, the $35,000,000 loan was discussed as if it could be owned by either Giant or No. 922. Most of those memoranda were written long after May 1987 when Giant made the $35,000,000 loan to the appellant and invested $22,000,000 in the appellant’s shares. An Arthur Andersen & Co. memorandum dated February 13, 1989 suggested that part of the May 1987 transaction could be "redocumented"! The same memorandum referred to the fact that "no filings have yet been made with either Revenue Canada or the Corporate Affairs body". The memoranda of Arthur Andersen & Co. were equivocal at best and certainly not conclusive on whether the $35,000,000 loan had been assigned by Giant to No. 922.

Without producing any executed assignment of the loan from Giant to No. 922, the appellant asks me to infer that Giant did intend to make such an assignment and that it did in fact occur. On the evidence before me, I am not inclined to infer either the intention or the occurrence. Acknowledging that No. 922 is a wholly owned subsidiary of Giant, there must be some formal document like a directors’ resolution or an executed transfer. In Abrahams [No. 2] v. M.N.R., [1966] C.T.C. 694, 66 D.T.C. 5453, Jackett P. stated at pages 708-09 (D.T.C. 5461):

While, as against third parties, the intent of a closely held company is to be judged by the acts of those who are in charge of its affairs and the Court is bound to assume that the owner of all the shares of a company who purports to act on its behalf has taken the necessary steps to give himself the authority he purports to have, when it is a question of establishing, as between such a person and third parties, that he has entered into a contract with a company all of whose shares belong to him, in my view, evidence is required to establish that there has in fact been a formulation and expression of the intent of the company, which is not, after all, a person of flesh and blood having a mind of its own, in one of the modes contemplated by the law, namely a resolution of the board of directors or an act of an officer, servant or agent of the company acting in the course of employment or of the agency.

Similarly, in Friedberg v. Canada, [1992] 1 C.T.C. 1, 92 D.T.C. 6031 (F.C.A.), Linden J.A. delivered the judgment of the Federal Court of Appeal and stated at pages 2-3 (D.T.C. 6032):

In tax law, form matters. A mere subjective intention, here as elsewhere in the tax field, is not by itself sufficient to alter the characterization of a transaction for tax purposes. If a taxpayer arranges his affairs in certain formal ways, enormous tax advantages can be obtained, even though the main reason for these arrangements may be to save tax (see Canada v. Irving Oil Ltd., [1991] 1 C.T.C. 350, 91 D.T.C. 5106 (F.C.A.), per Mahoney J.A.). If a taxpayer fails to take the correct formal steps, however, tax may have to be paid. If this were not so, Revenue Canada and the courts would be engaged in endless exercises to determine the true intentions behind certain transactions. Taxpayers and the Crown would seek to restructure dealings after the fact so as to take advantage of the tax law or to make taxpayers pay tax that they might otherwise not have to pay. While evidence of intention may be used by the Courts on occasion to clarify dealings, it is rarely determinative. In sum, evidence of subjective intention cannot be used to "correct" documents which clearly point in a particular direction.

In line with these authorities, I will not infer an assignment of the loan by Giant to No. 922 when there is no formal document to that effect.

No officer or director of No. 922 was subpoenaed to give evidence in this appeal, and no financial statements of No. 922 were produced to show whether No. 922 had the loan as an asset on its balance sheet. It is possible, of course, that No. 922 was dissolved or is dormant or insolvent; and the appellant may be the only person from whom the Minister can hope to collect the tax. Although there is the concept of equitable assignment not requiring notice to the debtor, I should have thought that a loan of this magnitude with a 49-page loan agreement would not be assigned without some kind of notice to the appellant as debtor. In the absence of any direct evidence from Giant (the alleged assignor) or from No. 922 (the alleged assignee), how can I conclude that any part of the $35,000,000 loan was ever assigned by Giant? To the contrary, most of the evidence from the loan agreement (Exhibit A-2) to the final payments of principal in February 1989 (Exhibit A-10) persuades me that the loan remained the property of Giant at all relevant times. I find that the $35,000,000 loan was not assigned to No. 922, equitably or otherwise.

The appellant’s second argument, in sharp contrast to its first argument, assumes that the $35,000,000 loan was not assigned by Giant to No. 922 and that any interest paid by the appellant to No. 922 was received by No. 922 as agent for Giant. This argument requires a careful interpretation of section 215 of the Income Tax Act the relevant portions of which are set out above.

Part XIII of the Act (sections 212 to 218) imposes a tax on certain kinds of income which a person resident in Canada pays or credits to a nonresident person. When a person resident in Canada pays or credits an amount on which tax is payable under Part XIII, subsection 215(1) requires that person to withhold and remit the amount of the tax on behalf of the non-resident. And to put teeth in that requirement, if the payor resident in Canada fails to withhold the tax, subsection 215(6) makes the payor liable to pay as tax on behalf of the non-resident the whole of the amount that should have been withheld. In summary, this is the mechanism by which tax is collected from a non-resident on certain kinds of Canadian-source income.

The appellant places particular emphasis on subsection 215(3) which provides that, when an amount on which tax is payable under Part XIII is paid or credited to an agent for the non-resident person entitled to payment, the agent is required to withhold and remit the amount of the tax on behalf of the non-resident. The appellant argues that, under subsection 215(3), when a Canadian debtor pays interest on its loan to a resident agent of the non-resident creditor, the agent becomes liable for the withholding tax and the initial Canadian payor of the interest ceases to be liable. There is no specific provision in the Act which states that the initial Canadian payor ceases to be liable. The agent becomes liable under subsection 215(3) when an amount is paid or credited to the agent "without the tax having been withheld or deducted under subsection (1)".

Counsel for the appellant refers to subsection 216(4) to support his interpretation of subsection 215(3). Section 216 is a special scheme which permits a non-resident recipient of a timber royalty or rent on real property to file a return of income under Part I and, in effect, pay Part I tax on the net Canadian-source income in lieu of the Part XIII tax on the gross royalty or rent. The relevant words of subsection 216(4) are:

216.(4) Where a non-resident person...has filed with the Minister an undertaking...to file a return of income under Part I for a taxation year as permitted by this section...a person who is otherwise required by subsection 215(3) to remit in the year an amount to the Receiver General in payment of tax on rent on real property or in payment of tax on a timber royalty may elect, by virtue of this section, not to remit under that subsection but if he does so elect

(a) he shall, when any amount is available out of the rent or royalty received for remittance to the non-resident person...deduct therefrom 25 per cent thereof and remit the amount deducted to the Receiver General on behalf of the non-resident person...on account of the tax under this Part, and

When a non-resident recipient of such royalty or rent has undertaken to file a return under Part I, subsection 216(4) permits an agent who receives the royalty or rent to elect to pay Part XIII tax based on any net amounts remaining in his hands after paying expenses on behalf of his non-resident principal. Subsection 216(4) seems to assume that the agent will have received the gross amount of the royalty or rent free of withholding tax and, if the non- resident person does not file a return under Part I or pay the tax, the agent becomes liable under paragraph 216(4)(b) to pay the full amount that he would otherwise have been required to remit.

Appellant’s counsel gave the following example to illustrate the use of subsection 216(4). A Canadian agent who received $100 of gross rent or timber royalty for his non-resident principal could have operating expenses of $90 to pay out of the gross amount. After paying those expenses, the agent would then remit to the Receiver General 25 per cent of the remaining $10 which is available for payment to the non-resident principal. This provision will work only if the initial Canadian payor of the rent or royalty pays the gross amount to the agent. Otherwise, the initial payor would withhold and remit 25 per cent of the gross amount leaving the agent with only $75 to pay $90 of expenses. In my view, if the Canadian agent is required to pay certain expenses and, his non- resident principal exercises the option in section 216 to pay Part I tax, there is nothing in section 216 which relieves the initial Canadian payor of his obligation to withhold and remit under subsection 215(1). The possibility that the agent may have a cash shortfall in paying expenses is a problem which must be solved with his principal. That possibility should not affect the interpretation of the statute. Also, subsections (6) and (7) of section 227 permit the non-resident principal to recover any overpayment of tax.

I will not use subsection 216(4) as an aid in construing subsection 215(3) for three reasons. First, section 215 has general application to all of Part XIII and is a vital mechanism which permits the Minister of National Revenue to collect tax from non-resident persons on certain income derived from within Canada. Second, section 216 has restricted application only to those circumstances in which a non-resident person is given the option of paying tax under Part I or Part XIII on two particular kinds of Canadian- source income. And third, what I regard as the most important reason, section 215 is clear and not ambiguous. It does not need any aid to construction.

Subsections 215(1) and 215(6) impose liability on the initial Canadian payor. Subsections 215(2) and 215(6) impose liability on the agent of the Canadian payor. And subsections 215(3) and 215(6) impose liability on the agent of the non-resident. There can be no doubt about their meaning. Considering the difficulty of collecting tax from a non-resident person, all of these provisions are needed. In a nutshell, the appellant argues that if subsection 215(3) can apply, then subsection 215(1) does not apply. That is an argument for under-inclusive interpretation. To permit the full operation of the scheme for collection in section 215, I would prefer to give that section an over-inclusive interpretation. I am supported in this approach by the decision of this Court in Havlik Enterprises Ltd. v. M.N.R., [1989] 1 C.T.C. 2262, 89 D.T.C. 159 (T.C.C.) which involved the application of subsections (1) and (2) of section 215 because payment of interest to a non-resident was made by the agent of the initial Canadian payor. Rip J. stated at page 2270 (D.T.C. 164):

The provisions of subsection 215(2) do not extinguish the debtor’s obligation to withhold or deduct under subsection 215(1).... In the event the amount of tax has not been deducted or withheld the debtor and his agent or the person who has paid or credited an amount on behalf of the debtor are jointly liable for the payment.

And further at page 2271 (D.T.C. 165):

The opening words of subsection 215(6), ’’where a person has failed” may refer to either a debtor or his agent. The liability of a person under certain conditions for failure of another person to withhold and deduct does not extinguish the latter’s liability under the Act. No excessive withholding is encouraged. Parliament made liable to withhold or deduct any person who makes a payment or credit to a non-resident, or who makes such payment or credit on his behalf or for his benefit. The theory of exclusive liability to the person who has final control over the payment to the non- resident, propounded by the appellant’s counsel, is not valid.

Subsections (1), (2) and (3) of section 215 operate in tandem. Subsection 215(1) applies to the initial Canadian payor of the amount whether it be interest, rent, royalty, dividend, etc. Subsection 215(2) applies to an agent of the initial Canadian payor as, for example, a transfer agent paying a dividend on behalf of a listed public corporation. Subsection 215(3) applies to an agent of the non-resident owner of the debt, land, patent, share, etc. And subsection 215(6) imposes liability on any one of those persons who fails to withhold and remit. In the overall collection scheme reflected in section 215, subsection (3) is important if the agent is acting for an undisclosed principal and the initial Canadian payor has paid the gross amount to the agent with no knowledge or reason to believe that the amount paid is beneficially owned by a non-resident person. In those circumstances, it is difficult to see why the initial Canadian payor should be liable under subsection 215(6) for failure to withhold and remit. By the same token, it is easy to see why the agent should be liable under subsection 215(6) for failure to withhold and remit because the agent, upon transmitting the payment to his principal, knows that the principal is a non-resident person and that no amount was withheld by the initial Canadian payor. It seems to me that the liability imposed by subsection 215(6) is dependent upon the knowledge of the payor but I am not required to decide that precise issue on the facts herein.

Subsection 215(3) makes it a condition of the agent’s liability that he has received the payment "without the tax having been withheld or deducted under subsection (1)". Counsel for the appellant argues that the presence of those words in subsection 215(3) is a clear indication that the initial Canadian payor has no obligation to withhold and remit if the payment is made to a Canadian agent of the non-resident. I do not agree. Those words are only a condition to be satisfied before the agent will become liable. And that condition will more likely be satisfied if the initial Canadian payor has no knowledge of the non-resident principal. But when the initial Canadian payor knows that he is paying an agent resident in Canada acting on behalf of a non- resident principal, then I would hold (in accordance with the decision in Havlik) that the initial Canadian payor and the agent are jointly liable under subsections (1), (3) and (6) of section 215.

Carried to its logical conclusion, the appellant’s argument is a "last chance" interpretation of subsections (1), (2) and (3) of section 215. The person in Canada who has the last chance to withhold and remit the tax before the gross income amount falls into the hands of the non-resident recipient would be the only person liable under section 215. The appellant’s argument for exclusive liability is not supported by the words in subsections (1), (2) and (3). Also, such an interpretation would permit any non-resident person to avoid the Part XIII tax and nullify the collection scheme in section 215 if such person (i) established a new Canadian corporation with no assets; (ii) directed the Canadian debtor to pay the income to the new corporation; (iii) scooped the income from the new corporation without paying any tax under Part XIII; and (iv) left a "shell" corporation with no assets for the Minister of National Revenue to pursue if and when the Minister traced the income. That scenario may have already occurred.

The appellant cited the decision of the Tax Review Board in MacMillan Bloedel Ltd. v. M.N.R., [1979] C.T.C. 2342, 79 D.T.C. 297, involving the payment of interest by MacMillan Bloedel on a class of debentures to persons resident in the U.S.A. some of whom appeared to be nominees or agents for the beneficial owners of certain debentures. The issues in that case were (i) whether the payor was obliged to ascertain the country of residence of the beneficial owners; and (ii) whether the payor was obliged to withhold tax at the statute rate (25 per cent) or the treaty rate (15 per cent). In the course of his judgment, the learned Assistant Chairman of the Board stated at page ??? (D.T.C. 299):

In the course of the argument reference was made to subsection 215(3) of the Income Tax Act. This section seems to say that, if the Canadian payer pays interest to the Canadian agent of a non-resident (which fact is known to the Canadian payer), theCanadian payer is not required to deduct or withhold tax but the Canadian agent is to deduct or withhold the whole amount or the shortage, if any, from the payment to the non-resident.

That statement is obiter dicta because it was not necessary for the decision of the Board in MacMillan Bloedel. Also, with great respect, I think that the wording in subsections (1), (3) and (6) of section 215 does not support that statement.

In my opinion, the initial Canadian payor is required to withhold and remit under subsection 215(1) if he knows that a non-resident person is the beneficial owner of the amount he is about to pay even if such amount is paid first to some intermediary. This applies to the facts herein because the appellant borrowed $35,000,000 from Giant (a non-resident) under the terms of a 49-page agreement. The appellant knew from the agreement that Giant was the lender and, soon after the loan, Giant gave directions to the appellant to pay interest to No. 922 ’’until further notice". Giant later gave directions to the appellant with respect to the repayment of principal including the last amounts of principal. The appellant was never given notice by Giant (or any other person) that the loan had been assigned to No. 922 (or to any other person resident in Canada). I am describing in this paragraph only the state of the appellant’s knowledge because I have previously held that the loan was not assigned to No. 922 equitably or otherwise.

The remaining issue is whether, when paying interest to No. 922, the appellant paid or credited an amount within the meaning of subsection 215(1). The appellant as debtor knew that Giant was the creditor. Giant instructed the appellant to pay interest to No. 922. The loan was not assigned. Therefore, No. 922 was the agent of Giant. It has been established as a principle of law that when a third party is paid by a debtor on the instructions of a creditor, the transaction constitutes payment on account of the creditor. The following statement appears in Canadian Encyclopedic Digest Ontario, Third edition, Volume 8, Title 43, "Debtor and Creditor", Paragraph 196:

Payment by the debtor to a third person at the request of the creditor is payment to the latter. Where a debtor pays money to a person other than his creditor for the purpose of discharging the debt, the debtor must show the authority of the recipient to receive the money for the creditor and it is sufficient to show either express or implied authority.

I therefore conclude that when the appellant paid interest to No. 922 on the instructions of Giant, the appellant paid interest to Giant. Because the appellant knew that Giant was a non-resident and was at all relevant times the owner of the loan, the appellant was obliged under subsection 215(1) to withhold and remit the appropriate tax from each payment of interest whether such payment went directly to Giant or to No. 922 as an agent for Giant. This is sufficient to impose liability on the appellant under subsections 215(1) and 215(6) for any failure to withold and remit. The appeal is dismissed with costs. Appeal dismissed.