Diamond Stacking – B.C. Supreme Court finds that a purchaser could not rely on a vendor’s GST exemption certificate where he knew of the property’s commercial use

ETA s. 194 provides that where a supplier has incorrectly certified that a sale of real estate was of exempt residential real estate, then the sale price is deemed to have been inclusive of the applicable GST/HST (so that it is that supplier rather than the purchaser who bears that GST/HST) – except where the purchaser “knows or ought to know that the supply is not an exempt supply.”

A vendor certified that an 18-acre property was an exempt residential property and, when it was assessed by CRA for failure to charge GST on the 16-acre portion of the property that was used as a blueberry farm, sued the purchaser for the GST thereon, plus interest. Saunders J found that the purchaser knew of the property’s use as a blueberry farm, and stated that the purchaser thus “possessed knowledge of fact which, through taking the appropriate advice a reasonable person would seek on those facts, would have indicated that GST would apply to the sale.” Accordingly, since the contract was silent on GST, the vendor was entitled under ETA s. 224 to recover its GST assessment from the purchaser – but had no entitlement to recover interest that CRA has assessed against it.

Neal Armstrong. Summaries of Diamond Stacking Co. Ltd. v Zuo, 2019 BCSC 1849 under ETA s. 194 and s. 224.