Curragh Inc. v. The Queen, 94 DTC 1894 (TCC)

There was no written assignment or other convincing evidence that a loan that an Australian corporation ("Giant") had made to the taxpayer had been assigned by Giant to its Canadian subsidiary ("922"). Furthermore, the taxpayer was unsuccessful in its submission that because 922 was liable for withholding tax under s. 215(3), the taxpayer should be considered to be relieved of liability under s. 215(1). Mogan TCJ. stated (p. 1899) that:

"... when the initial Canadian payor knows that he is paying an agent resident in Canada acting on behalf of a non-resident principal ... the initial Canadian payor and the agent are jointly liable under subsections (1), (3) and (6) of section 215."

He also stated (p. 1899) that:

"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."

There was no written assignment or other convincing evidence that a loan that an Australian corporation ("Giant") had made to the taxpayer had been assigned by Giant to its Canadian subsidiary ("922"). Furthermore, the taxpayer was unsuccessful in its submission that because 922 was liable for withholding tax under s. 215(3), the taxpayer should be considered to be relieved of liability under s. 215(1). Mogan TCJ. stated (p. 1899) that:

"... when the initial Canadian payor knows that he is paying an agent resident in Canada acting on behalf of a non-resident principal ... the initial Canadian payor and the agent are jointly liable under subsections (1), (3) and (6) of section 215."

He also stated (p. 1899) that:

"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."

In response to a submission that s. 216(4) seems to assume that a Canadian agent of a non-resident will receive rents or royalties on behalf of the non-resident free of withholding tax, Mogan TCJ. stated (p. 1898) that:

"... 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."