Words and Phrases - "credit note"

The appellant (North Shore) paid half (or approximately $3.0 million plus HST) of the purchase price for various solar array projects to the supplier (“Menova”). Menova only completed approximately 1/5 of the work, and issued “Credit Memos” (including HST) to North Shore late 2010 and in 2011 to reflect the work for which it had been paid but had not performed. North Shore made additions to its net tax under s. 232(3)(c) to reflect the HST in these credit memos. However, Menova was insolvent and was petitioned by North Shore into bankruptcy on June 29, 2012. North Shore sought to effectively reverse the s. 232(3)(c) additions to its net tax by claiming bad credits under s. 231. CRA initially assessed on the basis that the sums received by North Shore were deposits, but thereafter its position was that the s. 232(3)(c) additions and s. 231 credits were valid and invalid, respectively. North Shore ultimately accepted that the s. 231 credits claimed were invalid, so that the sole issue was whether the Credit Memos constituted credit notes under s. 232(3).

North Shore had argued (at para. 30):

A mere recording of the credit does not meet the test. …[T]here was no amount set aside or provision made by Menova, the debtor, under the Credit Memos, to honour the credit.

In rejecting this submission, Bocock J first referred (at para. 33) to the ordinary meaning of “credit note,” e.g., “A note issued by a business indicating that a customer is entitled to be credited by the issuer with a certain amount,” and then stated (at para. 37):

The Credit Memos were factually sufficient to provide a clear indication of a credit being established in writing to the detriment of Menova and to the benefit of North Shore. …