The petitioner (“bcIMC”) was created as a provincial Crown corporation by special Act (the “PSPPA”) to manage and hold investments for B.C.’s public sector pension plans as Crown agent. A Regulation made under the PSPA provided that bcIMC was to hold various investment assets in its pooled investment portfolios, the (pension plan) investors in a pooled portfolio were to be issued units of the portfolio in proportion to their interests, that "All the assets of a portfolio are held in trust by the [bcIMC]” and that “ownership in any asset in a portfolio must not be attributed to a participating fund.” 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”) which provided that the Province and its agents would pay any tax imposed under Part IX of the ETA. Following a GST audit, bcIMC brought an application for a declaration that it was not subject to tax under the ETA. CRA subsequently 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)(a) 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.
The Court below found that bcIMC as a provincial Crown agent was immune from taxation under s. 125 of the Constitution Act, 1867, but found that the RTA together with a second agreement between Canada and the Province (the “CITCA”) was legislatively binding on bcIMC.
Willcock JA found (at para. 113) that ETA s. 267.1(5)(a) and related rules effected “a change in the identity of the recipient of the services from the trustee, here the exempt Province, to the trust, a third party” and thereby “had the effect of separating the Crown from its assets” and that instead “bcIMC is immune from Canada’s taxation” (para. 114).
However, in also affirming the finding below as to the binding effect of the RTA and the CITCA on the Province’ agent (bcIMC), he stated (at para. 142):
[T]here is no doubt that agreements between the federal and provincial governments may be mere political agreements or legally enforceable. As noted in South Australia [(1962), 108 C.L.R. 130], where any particular agreement falls on this spectrum will depend on the circumstances of the case and whether the parties intended to be legally bound. In my opinion, the RTA and the CITCA bear the hallmarks of agreements that were intended to create legally binding obligations.
He further stated (at paras. 148-150) that “enforcement of the [Agreement] is possible” pursuant to s. 19 of the Federal Courts Act (Canada) and s. 1(1)(a) of the Federal Courts Jurisdiction Act (B.C.).