https://decision.tcc-cci.gc.ca/tcc-cci/decisions/en/item/421499/index.do
Georgeson Shareholder Communication Canada Inc. v. The Queen (September 4, 2019 – 2019 TCC 148, Ouimet J.).
Précis: The taxpayer operated a business of “asset reunification”:
[14] The Applicant’s clients were shareholders that had unclaimed shares or cash distributions or dividends derived from such shares (the “Share Entitlements”). The Applicant’s asset reunification business consisted of locating these shareholders and acting on their behalf to arrange for the transfer of their Share Entitlements. In exchange for this service, the Applicant charged a commission that generally equalled 15 percent of the value of the Share Entitlements transferred to a shareholder.
[15] In order to carry on its asset reunification business, the Applicant entered into two distinct agreements. First, the Applicant entered into an agreement with the share issuer (the “Program Agreement”). Second, the Applicant entered into an agreement with the shareholders. This agreement was detailed on a claim card (the “Claim Card”) that was signed by the shareholders. After it was signed, the Claim Card became the agreement between the Applicant and a shareholder.
It did not charge GST/HST in respect of its services to the share issuer or the shareholders. The taxpayer’s position was that the services it rendered to the shareholders were tax exempt and it did not charge anything for services rendered to the share issuers. Moreover it claimed that the admissions contained in the Crown’s pleadings were sufficient to entitle it to judgement under section 170.1 of the Tax Court of Canada Rules (General Procedure). The Crown took the position that there was too much ambiguity about the application of the financial services rules to this type of structure to entitle the taxpayer to summary judgment. The Tax Court agreed with the Crown’s position and dismissed the taxpayer’s motion, with costs.
Decision: This is a case of the taxpayer adopting what, on the face of things, appears to be a very clever business structure designed to minimize or eliminate its obligations to collect and remit GST/HST. However applying for judgement under section 170.1 of the Rules appears to have amounted to overplaying its hand. The Tax Court took a predictability conservative view of the matter and dismissed the application, leaving the ultimate issue to be determined by the trial judge:
[94] Considering the applicable law, the admissions and the positions taken by the parties with respect to the constituent elements (services) of the supply made by the Applicant, the Court has concluded that there is controversy in this case.
[95] Specifically, we are in a situation where the law is not settled on a specific issue which is at the centre of the case before the TCC. To the Court’s knowledge, the courts have not yet determined whether, for the purpose of the application of the ETA, the constituent elements (services) of a supply made under a contract between a supplier of a service and a recipient could be considered as part of a single supply made to another recipient. Therefore, there is an argument to be made by the parties on this issue.In fact, the positions already taken by the parties on the issue clearly indicate that this is the case.
[96] Finally, because of the positions taken by the parties on that same issue, the relevant facts cannot be identified. It is therefore impossible to determine whether the admissions are sufficient for the Court to render a judgment on admissions.
[97] This is sufficient for the Court to come to the conclusion that a trial should take place, and the Court will not render a judgment on admissions pursuant to section 170.1 of the Rules.
[98] The motion is dismissed, with costs.