Canada: All That Glisters Is Not Tolled, But Is The Story Fully Told?

Last Updated: October 30 2018
Article by Les J. O'Connor

On October 10th, 2018 the Ontario Court of Appeal released its decision dismissing the appeal in the case of National Money Mart Company v 24 Gold Group Ltd., 2018 ONCA 812 (hereafter, Money Mart v. 24 Gold).

Facts

This action concerned a series of sales by Money Mart to 24 Gold over a period of more than a year, totalling some $12.16 million dollars' worth of unrefined gold.

The weird aspects of the facts were that throughout this period, all the sales were oral agreements; not a single invoice was given to 24 Gold and no HST was charged on the sales, or paid by 24 Gold or subsequently remitted by Money Mart, a registrant under the Excise Tax Act, to the Canada Revenue Agency ("CRA").

Why?

The excuse given, as reflected in the reasons of the Court of Appeal by Justice Brown (concurred in by Hoy A.C.J.O. and Trotter J.A.), is one of mistake. Parenthetically, one may have questions about a mistake over a series of transaction lasting more than a year, adding up to $12.16 million dollars of purchases by 24 Gold supplied by Money Mart, and not a single invoice.

In any event, in 2015, after these transactions were long over, CRA caught up with Money Mart and reassessed it for unpaid HST in the eye-opening amount of $1,573,903.94 and, it seems, helped itself to this money by accessing Money Mart's corporate tax payments on account to satisfy the assessment.

Money Mart then turned around in 2015 and demanded that 24 Gold reimburse it for the HST amount assessed, which 24 Gold refused to do.

Money Mart then sued for it and, on a summary judgment motion, was given judgment which 24 Gold appealed to the Court of Appeal.

In the lower court, 24 Gold's argument focused on two allegations that the action was out of time based on: (1) a limitation period in section 225 of the Excise Tax Act itself; and (2) the general two-year limitation period in section 4 of the Limitations Act, 2002. It maintained these positions in the Court of Appeal initially, but when it changed counsel, before the appeal was heard, it instead brought forward a new theory of its case.

This new theory was that the action could not succeed because Money Mart had not complied with a condition precedent in section 224 of the Excise Tax Act, which authorizes a supplier to sue a purchaser if the supplier has complied with section 223(1). 24 Gold argued that Money Mart had not complied with the requirement under section 223(1) to give 24 Gold an invoice setting out the HST at the time of the supply transaction itself, and that it could not bootstrap its position by now sending invoices several years later.

Main Issue

The main issue for the Court then was whether the invoice or written notice had to be given at the happening of the transactions in 2010-2012 or whether it could be given much later, in 2015.

24 Gold's chief argument was that section 223 of the Excise Tax Act required that the "invoice" for the HST component of the transaction be issued contemporaneously with the sale itself, and that it could not be done later, in this case years later, after the sales of gold took place.

Justice Brown, in dealing with 24 Gold's position, set out the wording of section 223, which is as follows:

223(1) If a registrant makes a taxable supply, other than a zero-rated supply, the registrant shall indicate to the recipient, either in prescribed manner or in the invoice or receipt issued to, or in an agreement in writing entered into with, the recipient in respect of the supply,

(a) the consideration paid or payable by the recipient for the supply and the tax payable in respect of the supply in a manner that clearly indicates the amount of the tax; or

(b) that the amount paid or payable by the recipient for the supply includes the tax payable in respect of the supply.

He then discussed a number of past trial-level decisions on the meaning of that section, and focused on a New Brunswick Court of Appeal decision in OCCO Developments Ltd. v McCauley, [1996] GSTC 16 (NB CA) ("OCCO") as the appellate-level decision that provides guidance as to the proper interpretation of section 223 regarding the timing of the invoicing. That case dealt with GST on a condo purchase that was partially invoiced at first, but in the wrong amount. Later on, after a CRA reassessment of the proper amount owing, the vendor invoiced the purchaser for the balance, but the purchaser refused on the basis, it appears, of the lateness of the invoice. The vendor was permitted to recover the balance from the purchaser by the New Brunswick Court of Appeal, despite it being years later.

Justice Brown, therefore, agreed with the finding of the majority of the New Brunswick Court of Appeal in OCCO, in reasons written by Bastarache J.A. (as he then was), that an invoice does not need to be delivered contemporaneously with the transaction, but can be provided later, as here. This, he further agreed with Bastarache J.A., was supported by the fact that it would take clear language in the section to make it time-sensitive, and section 223(1) does not reveal any intention of Parliament to impose such a restriction. Justice Brown also agreed with Bastarache J.A. that this interpretation was consistent with the scheme of the Act, where the registrant seller is merely the agent of the CRA. If the seller were not permitted to correct a disclosure deficiency, it could wind up, in circumstances where the purchaser (the real target of the Act) did not pay, having to absorb the loss as principal, which does not fit well with its role of agent.

There was a second issue in the OCCO case on which the New Brunswick Court of Appeal was divided. The issue was whether the fact that the vendor in OCCO had not paid CRA before it sued had an impact on the litigation. Since here the CRA had "helped itself" and was paid off before the suit by Money Mart, Justice Brown found that he did not need to consider that aspect of OCCO in the case before him.

Justice Brown drew further support for his interpretation of section 223(1) from a book written by a Mr. Sherman which espouses the same view of the intention of Parliament as to invoicing, and also from the stated interpretational policy of CRA itself, which contemplates that it is permissible to invoice later on than the time of the actual transaction.

Justice Brown also discussed several cases decided after the OCCO case which essentially follow its lead and find acceptable under section 223(1) "invoicing" for HST long after the transaction has taken pace. Therefore, it appears that this interpretation of the section as not requiring a contemporaneous delivery of the invoice for the tax has become fairly settled law.

Secondary Issue

Apart from the main point of the case discussed above, the Court of Appeal also dealt with a secondary issue, of a practice nature. Money Mart alleged that 24 Gold was raising on the appeal an argument that it had not made at the motions court below. Remember that its fight previously had been based on limitation period arguments, not an interpretation argument suggesting that Money Mart had failed to comply with a condition precedent to its action. 24 Gold said that it had raised this point earlier, but Justice Brown disagreed and found it to be a new ground at the appellate level, which the court will seldom entertain. However, he reviewed the test for permitting new issues on appeal and found that, as it was really a question of pure law as to the proper interpretation of section 223(1) and an issue that would not cause Money Mart prejudice in the legal sense, the point could be dealt with even though it was freshly raised only on the appeal. As we have seen, Justice Brown decided this point against 24 Gold and ultimately dismissed its appeal.

Further appeal?

With about $1.574 million dollars at stake, there is certainly enough involved for 24 Gold to take a further shot at an application for leave to appeal to the Supreme Court of Canada and, because it involves the interpretation of a federal statute, that may give it a leg up to finding some national interest component to the case, but we will have to wait several months to find out if it tries to get leave.

Finally, for the writer, it is hard to envisage about 12.6 million dollars' worth of merchandise leaving the shop over two years without an invoice. What if anything are we missing here?

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Events from this Firm
7 Dec 2017, Webinar, Toronto, Canada

FEX Members Jeff Noble, BDO, and Caroline Abela, WeirFoulds LLP, invite you to a complimentary webinar series titled: All About Shareholders.

11 Nov 2018, Seminar, Toronto, Canada

WeirFoulds Partner Glenn Ackerley will Chair the RICS & CIQS 5th Annual Construction & Project Management Seminar.

10 Dec 2018, Seminar, Toronto, Canada

Join us for our last CPD seminar before the year ends! This program has been accredited for 1.5 hours of Professionalism Content as approved by the Law Society of Ontario.

 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions