http://decision.tcc-cci.gc.ca/tcc-cci/decisions/en/item/218435/index.do
2252493 Ontario Limited v. The Queen (January 31, 2017 – 2017 TCC 20, Bocock J.).
Précis: The taxpayer sold real property to Mayling Holding Inc. (“Mayling”) by agreement of purchase and sale executed in 2011. The transaction closed in 2012. The taxpayer did not collect and remit HST on the $3,200,000 purchase price. CRA assessed the taxpayer for $416,881.83 (the “HST Amount”) on the basis that Mayling was the recipient of the supply and was not an HST registrant. The taxpayer argued that on the date of closing Mayling held the property for the benefit of one of two possible registrants, “Baziz YYC” or “840 Holdings”. The Court held that the taxpayer had simply not met the onus of proving that the recipient of the property was (a) a person other than Mayling and (b) a registrant at the date of closing. The appeal was dismissed with costs awarded to the Crown, subject to the parties having 30 days to make additional submissions on costs.
Decision: This was simply a case of the paperwork not supporting the taxpayer’s argument. The taxpayer argued that when the agreement of purchase and sale (“APS”) was closed the true new owner was either “Baziz YYC” or “840 Holdings” both of which were alleged to be HST registrants. The Court just did not accept this as a matter of fact:
[32] At the time the APS was executed, neither Bazis YYC nor 840 Holdings existed. Factually, neither of the purported agent or bare trustee nor principal or Beneficial Owner existed when the APS was executed. The reasons which follow concerning the documentary evidence and intention of the parties up until the closing date regarding the existence of a trust applies equally to the concept of agency.
[33] The suggestion that broad assertions made after a subject transaction is closed, may transform a directed transferee, such as 840 Holdings, into a trustee, or Bazis YYC and/or Plazacorp into a beneficiary and obligor under all of the APS, closing documentation or non-merging covenants is neither factually nor legally correct in the absence of documentation.
[34] All CRA publications direct and assume that uncontroverted or, at least, predominant evidence concurrently existing at the closing date need consistently reveal a trust (bare or otherwise) or, for that matter, an agency relationship. The words “where a trust or where an agency exists” are interlineated throughout these CRA publications. The following factual findings in this case fail to approach an indication of such existence at or before the closing date:
(a) there is no assumption by 840 Holdings or consent by Mayling of anything approaching liability under the APS, the closing documentation or land transfer tax affidavit: Lounsbury Co. v. Duthie [1957] SCR 590 at paragraphs 13 and 14. At law, Mayling was not relieved of its obligations under the APS by any identifiable document. Furthermore, the Appellant is not asserting it was a beneficiary, but an agent and/or bare trustee;
(b) there is no settlement or settling by Mayling of the Property or the right to legally hold same upon 840 Holdings as a trustee or agent for the alleged Beneficial Owners. As such, no documentation suggests that anyone other than Mayling was liable to pay the consideration to the Appellant or assume the leases: Y.S.I.’s Yacht Sales International Ltd. v. R., 2007 TCC 306 at paragraph 57 and Merchant Law Group v. R., 2010 FCA 206 at paragraphs 12-14;
(c) the dated “as of August 30, 2012” Co-tenancy Agreement and revamped statutory declaration and indemnity, contemporarily produced for the first time after the reassessment was issued or threatened, are given little weight for several reasons. First, there is no clear indication when the “original co-tenancy agreement”, which the Co-tenancy Agreement replaced, was actually executed or when temporally the Property was actually settled upon the “trust”. Second, this document references nowhere within it how 840 Holdings acquired is title, rights or assumed its obligations from Mayling to, in turn, hold same for the Beneficial Owners. Consistently, Mayling is neither mentioned in this document nor a signatory to it. Third, the statutory declaration and indemnity of Bazis YYC are not dated on the date fixed for closing, August 29, 2012, but on August 30, 2012. This indicates these documents were executed and/or sworn post the actual closing date because they employ the actual registration date. This date was unknown to the parties when all effective closing documentation was otherwise prepared, executed and delivered. This strongly suggests a subsequent intention and action inconsistent with either Beneficial Owners being the recipient of the Property on the closing date;
(d) further, all documentation delivered to effect the closing on the closing date is equally as consistent, and is no more preposterous with the conclusion that, at the time of closing, 840 Holdings became both beneficial and legal owner of the Property or became a trustee or agent for the beneficiary, Mayling. If either of these interpretive scenarios be true, then the appealed assessment is still correct and the appeal shall fail. Factually, neither Mayling nor 840 Holdings was ultimately a HST registrant at the closing date. Quite apart from these alternative speculations, the fact remains that no closing documentation indicates that anyone other than Mayling remained the obligant to the Appellant under the APS at the time of its execution, during the period leading up to its closing, at the time all other closing documents were exchanged and at the closing date. Moreover, there is no documentation executed or even memorialising, in advance or concurrently with closing, that Bazis YYC or Plazacorp were obligants, beneficial owners or principals: Ritopecki v. Breslow Kantor Inc. et al., 1983 Carswell Ont 3429 at paragraphs 37 and 38. Is it the Appellant who must satisfy itself based upon the documentation delivered to it at closing as to the recipient of the supply and obligant under the agreement for supply at the applicable time.
[35] In conclusion, trusts (even bare ones) and agencies (however cursory) are not aspirational constructs formed by imprecise intention or inchoate plans: Baldasossarra v. MNR, 1990 CarswellNat 537 at paragraph 12 and Low v. HMQ, 1993 CarswellNat 996. This is especially true when the time for determination of the recipient and obligant is fixed: the time the contract for supply arises and the closing date. Section 133 of the Act makes this clear.
[36] Moreover, cases where a bare trust or agency have been found to exist, and are interpreted by CRA to exist, require some documentary or evidential disclosure of the various parties to the supplier at the time of supply. As an example, in GST new housing rebate cases, where the Court has found that among named parties in an agreement of purchase of sale, only one was the beneficial owner and the other a mere agent or bare trustee, both such parties executed or were inextricably concerned with the document(s) creating the supply and related obligations.
[37] In the present case, none of Bazis YYC or Plazacorp, the alleged Beneficial Owners and principals, nor 840 Holdings, the alleged trustee or agent, executed the APS, was described in such capacity to the Appellant or was reliably described in other contemporareous collateral documents as such. These facts are clearly distinguishable from the facts in the following authorities: Rochefort v. HMQ, 2014 TCC 34 at paragraphs 11 and 24; Javaid v. HMQ, 2015 TCC 94 at paragraph 22; Cheema v. HMQ, 2016 TCC 251 at paragraph 54 (as to documentation only).
[38] In summary, some inceptive documentation and actual foundation is required to engage the assistance of the publications authored by CRA, the authorities and, most importantly, the law of agency or trusts. While either relationship need not be disclosed or extensively documented, either relationship must be factually reflected during the relevant time in some effective form to fulfill their respective legal elements: Canpar Developments Inc. v. HMQ, 2011 TCC 353 at paragraphs 8 and 9 (as to trusts); Y.S.I.’s Yacht Sales, supra, at paragraphs 41 through 49 (as to agencies). Similarly, the vendor of commercial real property, such as the Appellant in respect of the Property, is required to ascertain at that relevant time: i) who is the recipient within the meaning of the ETA; ii) and whether the recipient is a registrant in order to relieve itself, as supplier, of the obligation of collecting the HST on the supply. Where the ostensible recipient, the person obligated to pay the consideration, is named in the APS as “purchaser”, then something more concurrent with closing than a one page unilateral direction regarding title is necessary to dislodge the countervailing, mutual agreement, patent facts, logical conclusions and legal obligations in the APS.
[39] The documentation in this case need not have been onerous or complex. A one or two page assignment and assumption agreement, a simple declaration of trust or co-execution of the APS as between Mayling and 840 Holdings. A then current and accurate disclosure of the Beneficial Owners as obligants would also have gone a long way. None of these documents were requested by the Appellant or given by Mayling, 840 Holdings or the Beneficial Owners on or before the closing date. As a result, there is simply no factual, documentary or deductive basis to conclude that the Appellant ought to have concluded any party other than Mayling was the recipient of the supply at the closing date. In summary, the conditional words, “where a trust or where an agency exists” do not apply to this appeal.
Accordingly the appeal was dismissed with costs awarded to the Crown, subject to the parties having 30 days to make additional submissions on costs.