Laval Technopole – Court of Quebec applies the traditional common law tests of Crown agency to determine whether companies were agents of Canadian municipalities

Various companies in Quebec whose function it was to promote commercial development, or cultural, sporting or tourist activities, in their respective municipalities, were found to be subject to a higher rate of employer health tax because they were an agent (“organisme mandataire”) of a Canadian municipality.

Notwithstanding that this was a Quebec case, Quenneville JCQ determined this question by essentially applying the common law function and control tests for determining crown agency (referencing “the nature and degree of control that the Crown exercises over the entity”). She noted that the municipalities themselves considered that they controlled the companies, in most cases a majority of the company’s board was named by the municipality or chosen from among a list proposed by the municipality (para. 58)), their budgets were approved by the municipal Councils, they received much of their financing from the municipalities and their activities were integrated with those of the municipalities. Quenneville JCQ stated:

It is important to emphasize that it is not actual control which must be considered, but rather the potential for the municipality to exercise such control.

Neal Armstrong. Summary of Laval Technopole v. Agence du revenu du Québec, 2018 QCCQ 6352 under s. 212(3) – fully exempt interest - (a)(iii).