Trademarks

In settling a dispute between the appellant and another insurance company, Canadian Group Underwriters Insurance Company ("Underwriters"), as to the ownership of two trademarks, Underwriters' interest in the trademarks was first transferred under ITA s. 85 to an affiliated corporation ("NN Life") in order to access NN Life losses, and then sold on the same day by NN Life to the appellant for $5 million in cash. The appellant was not entitled to an input tax credit for the GST charged on the sale. It applied for a refund of the GST under s. 261 on the basis that the trademark had not been sold to it in the course of a commercial activity.

In finding that the sale by NN Life was not an adventure in the nature of trade, Woods J stated (at para. 24):

NN Life did not negotiate the sale and likely acted as an accommodation party in order to minimize the income tax payable on the sale. The trademarks were acquired by NN Life on the same day as the sale to the appellant and NN Life gave consideration to Underwriters equivalent in value to what it received from the appellant. In no sense does this describe what McLaughlin J. referred to in Continental Bank as a "speculative trading venture."

After noting (at para. 40) that "in an income tax context, the phrase ‘carrying on business' is considered to require more activity than a single isolated transaction," she went on (at para. 41) to find that there was "no reason to depart from this reasoning for purposes of the ETA," so that the sale by NN Life also did not constitute a business.