Cases
Diamond Stacking Co. Ltd. v Zuo, 2019 BCSC 1849
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” (para. 25). Accordingly, since the contract was silent on GST, the vendor was entitled under ETA s. 224 to recover its GST assessment from the purchaser. Saunders J went on to state (at para. 39):
… Leong … held that a purchaser’s liability in such claims is limited to the GST amount only, as “penalty and interest liabilities only exist because of the vendor’s failure to collect and remit the GST, and not because of the purchaser’s failure to pay it” (quoting Len’s Construction at p. 6115). In the present case I find that reasoning applies to the interest of $6,028.84 claimed in the Plaintiffs’ demand letter. Thereafter, however, the additional interest that accumulated was due not only to the Plaintiffs’ conduct, but also to the Defendant’s failure to pay a demand that had been properly made. … The Defendant will therefore be liable for the additional interest charges ultimately paid by the Plaintiffs… .
National Money Mart Co. v 24 Gold Group Ltd, 2017 ONSC 6373
The plaintiff sold unrefined gold to the defendant (“24 Gold”) during the 24 months ending in mid-2012. After an audit, CRA assessed the plaintiff on June 1, 2015 for its failure to charge and remit HST of $1.6 million on such sales, which CRA collected. The plaintiff invoiced 24 Gold for the $1.6 million on May 31, 2015, and then brought this motion for summary judgment, in December 2016 seeking payment of that amount.
Diamond J found that the plaintiff’s claim was not statute-barred by reason of the Limitations Act 2002, stating (at paras 22 and 23):
24 Gold submits that … “at the very latest, the plaintiff ought to have issued a Statement of Claim by the summer of the year 2012” (i.e. at the conclusion of the series of its transactions with 24 Gold).
Section 5(1)(a)(iv) of the Limitations Act 2002 requires a person to have known that, having regard to the nature of the person’s loss, a legal proceeding would be an appropriate means to seek to remedy that loss. … Only when the plaintiff ended up paying the HST itself did it acquire a cause of action for the debt now due by 24 Gold. While I do not condone the delay on the part of the plaintiff to properly invoice the subject transactions, the bottom line is that the plaintiff could not commence a legal proceeding until the CRA audit resulted in the payment by the plaintiff of the outstanding HST. … As such, the limitation period did not commence until, at the earliest, June 1, 2015.
King Road Paving and Landscaping Inc. v Plati, 2017 ONSC 557
In finding that the contract price in a building contract which was silent on HST gave rise to an entitlement to collect HST in addition to the contract price, Charney J stated (at paras. 77-78):
In my view when a contract for goods and services is silent with respect to HST there is an inference that the price does not include HST, and that HST will be added to the quoted price.
…The case law supports the position that where, through oversight or other error, the supplier omits or incorrectly states the HST on the contract the recipient of the goods or services remains responsible for the full amount of the tax. To conclude otherwise would make the tax collector personally liable for the payment of the tax with no right of recourse against the tax payor. In this regard I adopt the analysis of Dorgan J. in Leong v. Princess Investments ltd., 1999 CanLII 6391 (BC SC) and the several cases cited therein. See also Prospect Builders Ltd. v. Fraser 1996 CarswellOnt 160; [1996] O.J. 119, (Ont. Gen. Div.), at paras. 14 - 16.
S.P. Holdings Canada Inc.. v. Ikea Ltd., [2001] GSTC 93 (Que CA)
The Court was prepared to assume (without deciding) that the right of action in s. 224 was not exclusive and that a right to recover GST could be established if there was an unequivocal undertaking on the part of the debtor to pay GST. However, such an undertaking was not established on the facts on this case.
Governor's Hill Development Ltd. v. Robert, [1993] GSTC 35 (Ont. Ct. G.D.), aff'd [1996] GSTC 43 (C.A.)
A clause in an agreement for the sale of a new condominium unit for a purchase price of $775,000 providing that "Vendor agrees to pay the GST" meant that the Vendor was required to absorb the GST applicable to the $775,000 purchase price. Accordingly, the Vendor was required to recover $775,000 from the purchaser, rather than 100/107 of that amount (as alleged by the purchaser). Eberle J. also stated that, had the agreement not made reference to GST, it would have been added to the stated purchase price.
See Also
2137691 Ontario Limited. v. Lucia Pessoa Park, 2018 ONSC 4218
The land for a large home in Oakville was divided by a corporation into three lots, so that the middle lot contained a pool house and hallway structure that connected to the rest of the home on the other two lots. The corporation then sold this middle lot to an individual purchaser coupled with a covenant that it would demolish this structure – which, however, it did not do until 45 days after closing. The sales contract provided that any HST was in addition to the sales price of $2.8M, but the vendor (the corporation) provided a statutory declaration that the property qualified for exemption as being used residential accommodation, so that no HST was collected on closing. A year later, it then brought a motion to recover HST from the purchaser.
The defendant argued that by virtue of ETA s. 224, the plaintiff was required to pay the HST on the sale (which had not been assessed by CRA) in order to have the right to sue the defendant. Although Coats J went on to find that there was not HST payable on the sale, she first stated (at para. 35):
[E]ven if I had found that HST is owing, it is within the court’s jurisdiction to determine the contractual obligations between private citizens. As stated by the Court in Rive v. Newton, 2001 CanLII 27986 (ON SC), [2001] O.J. No. 3226 (S.C.), confirmed on appeal [2003] O.J. No. 398 (C.A.), the court must determine the effect of agreements between parties.
NWorks Management Corp. (Globotech Communications) v. Lincourt, 2018 QCCQ 1021
A supplier (NWorks) charged GST, but failed to charge QST, on a number of supplies of services to the recipient thereof. When it was assessed by the ARQ for this failure, it promptly issued a revised invoice to the recipient for the previous transactions that showed the QST owing, which the recipient refused to pay.
Sirois JCQ preferred the jurisprudence (including Occo) that indicated that the documentary requirements of the Quebec equivalent of ETA s. 223 (i.e., QSTA s. 425) could be satisfied by issuing a revised invoice (in good form) for the tax well after the time of making the supply so that, under the Quebec equivalent of ETA s. 224, NWorks could recover the QST from the recipient. She also stated (at para. 116, TaxInterpretations translation) that two decisions to the contrary “added the non-existent words ‘at the time of invoicing’ to the text of QSTA section 425.”
Concol Construction Ltd. v. Andrews, [1995] GSTC 46 (Ont. Ct. J.)
GD - Ottawa Small Claims Ct
House D.J. stated (at p. 46-3):
"I am of the strong view that where an agreement for a sale is silent as to the GST and there is no written documentation to the contrary, that when at any time the Minister properly assesses a supplier with a liability to pay the tax on that sale, and all appeals have been exhausted, then if the supplier, having paid such tax, and having made a written demand on the recipient for reimbursement, the supplier has, in fact, complied with subsec. 223(1) of the Act and may commence an action under 224."
Pellizzari v. 529095 Ontario Ltd., [1995] GSTC 51 (Ont. Ct. J.)
G.D. - Stratford Small Claims Ct.
Searle D.J. followed 390781 Alberta Ltd. v. Mensaghi, [1992] GSTC 10 in finding that s. 224 was intended to be the sole means for a supplier to recover unpaid GST from a purchaser and that no common law remedy was available.
Lloyd v. Reierson and Reierson Logging Ltd., [1995] GSTC 26 (B.C. Prov. Ct.)
But for the fact that the corporate defendant had admitted liability for unpaid GST, the plaintiff would have been unable to collect that amount from the defendant because of its failure to comply with subsection 223(1). DeVilliers PCJ. stated (at p. 26-3):
"The debt that arose by reason of the failure of the defendant to pay the GST, or by reason of the failure of the claimant to collect it was a debt due to Her Majesty, and therefore not recoverable at common law by the claimant from the defendant."
It also was noted that s. 224 does not create a cause of action for penalties or interest.
Winnipeg Waste Disposal Limited Partnership v. The City of Portage La Prairie, [1992] GSTC 11 (Man. Q.V.), briefly aff'd [1993] GSTC 10 (Man. C.A.)
A contract which a municipality entered into with a contractor in the fall of 1989 that provided that the price to be paid to the contractor for its services in collecting garbage would include "all applicable duty, freight, cartage, Federal and Provincial Taxes and charges governmental or otherwise paid" was found not to exclude an additional charge by the contractor for GST, given the failure of the contract to add the phrase "whether in effect or hereafter imposed", in light of the contra proferentem doctrine, and in light of evidence that the contractor had informed the municipality, before it accepted the tender, that future GST was not included in the contract price.
Administrative Policy
27 November 2003 Internal T.I. 2002-0180587 F - Mauvaise créance et taxes de vente
The accounts receivable of a taxpayer include GST and QST that is collectible by it on those sales. Before indicating that the write-off of the balance would not generate a bad debt deduction for the GST/QST portion, CRA stated:
ETA section 224 and QSTA section 427 allow the supplier to recover from the recipient the GST and QST that the recipient should have paid in respect of the supply in question.
From a legal point of view, the sales taxes payable on the sale of a property are a debt due by the purchaser of the supply to the tax authorities and not to the supplier; the latter is only the collector (as agent of the applicable tax authorities) of those amounts. However, if, at the time of preparing the supplier’s tax return, the recipient has not yet paid the taxes relating to the property acquired, then the supplier must still remit such taxes to the applicable tax authorities. At that point, the debt to the tax authorities is transferred to the supplier by subrogation; the purchaser of the property becomes the debtor of the supplier and the latter therefore has an account receivable for an amount equal to the taxes unpaid by the supplier’s customer.