British Columbia Investment Management Corp. v. Canada (A. G.), 2016 BCSC 1803

The petitioner (“bcIMC”) was created as a provincial Crown corporation by special Act (the “PSPPA”) to manage, and hold investments in trust for, B.C.’s public sector pension plans as Crown agent. The PSPPA stated that bcIMC “is not liable for taxation except as the government is liable for taxation.” The Province and Canada signed a reciprocal taxation agreement (“RTA”), effective July 1, 2010, in which the Province committed itself and its agents to pay any tax imposed under Part IX of the ETA. On November 30, 2009, Canada and the Province entered into the Comprehensive Integrated Tax Coordination Agreement (“CITCA,” and with the RTA, the “Agreements”), where the Province agreed to implement the Harmonized Sales Tax. Well after bcIMC brought this application for a declaration that it was not subject to tax under the ETA, CRA assessed bcIMC for HST on fees which bcIMC took out of the funds under its administration, on the basis inter alia that ETA s. 267.1(5) deemed the statutory trust impressed on bcIMC’s investments to be a separate (non-Crown) person who thus was not exempt from federal tax – and also on the basis that the investment funds did not belong to bcIMC or the province but, rather, to the pension fund members.

In agreeing that bcIMC as a provincial Crown agent was immune from taxation under s. 125 of the Constitution Act, 1867 and s. 17 of the Interpretation Act, Weatherill J stated (at paras 131-132):

… Canada cannot, under the guise of the deemed trust provisions of the ETA or otherwise, defeat the Province’s immunity from taxation. Because bcIMC is statutorily mandated by the Province to provide investment management services to the Portfolios, bcIMC constitutionally enjoys the same tax immunity as the Province….

Canada…says that the Province and bcIMC do not own the Portfolios because the ultimate destination of the assets within the Portfolios is those individuals entitled to pension benefits. However, the PSPPA states that bcIMC holds the Portfolios as a statutory trustee and as such is the Portfolio’s legal owner.

However, Weatherill J found that the Agreements were legislatively binding on bcIMC, stating (at para 166):

… [I]n my view there is specific legislation that creates the obligation on bcIMC to pay the Tax. Section 16 of the PSPPA states that bcIMC “…is not liable for taxation except as the government is liable for taxation”. That language, in my view, is the specific legislative authority required to bind bcIMC to the Agreements and should be interpreted accordingly. Expressed another way, this section means that if the Province is liable for taxation (as it is because it signed the Agreements), so too is bcIMC. It is specific statutory language that cannot be ignored.

Accordingly, Weatherill J declared (at para 173) that notwithstanding bcIMC’s Crown immunity, it was bound by the provisions of the RTA and CITCA respecting the managed assets.

The petitioner (bcIMC) was a BC Crown agent which was formed to manage and hold, under a provincial statutory trust, investments for the provincial pension plans. Weatherill J rejected a federal Crown argument that bcIMC was not immune under s. 125 of the Constitution Act from HST otherwise payable on the fees taken out of the funds under its management on the grounds that ETA s. 267.1(5) deemed the statutory trust impressed on bcIMC’s investments to be a separate (non-Crown) person who thus was not exempt from federal tax on such fees, stating that “Canada cannot, under the guise of the deemed trust provisions of the ETA or otherwise, defeat the Province’s immunity from taxation.” However, he found that such immunity was taken away by agreements between B.C. and Canada in which the Province committed itself and its agents to pay any tax imposed under the ETA. He stated:

Section 16 of [bcIMC’s incorporating legislation] states that bcIMC “…is not liable for taxation except as the government is liable for taxation”. That language, in my view, is the specific legislative authority required to bind bcIMC to the Agreements and should be interpreted accordingly.