



COURT OF APPEAL FOR ONTARIO

CITATION: National Money Mart Company v. 24 Gold Group Ltd.,
    2018 ONCA 812

DATE: 20181010

DOCKET: C64588

Hoy A.C.J.O., Brown and Trotter JJ.A.

BETWEEN

National
    Money Mart Company, carrying on business under

the firm name and style of Money Mart

Plaintiff (Respondent)

and

24 Gold Group Ltd. and Kamel W.L. Hanna

Defendants (Appellants)

John Adair and Sean Husband, for the appellants

Marvin J. Huberman, for the respondent

Heard: May 18, 2018

On appeal from the order of Justice James F. Diamond of
    the Superior Court of Justice, dated October 27, 2017, with reasons reported at
    2017 ONSC 6373, [2017] G.S.T.C. 81.

Brown J.A.:

I.

OVERVIEW

[1]

The central issue on this appeal concerns the entitlement of the
    respondent, National Money Mart Company (Money Mart), to bring an action
    against the appellant, 24 Gold Group Ltd. (24 Gold), for unpaid Goods and
    Services Tax/Harmonized Sales Tax (HST) pursuant to s. 224 of the
Excise
    Tax Act
, R.S.C. 1985, c. E-15 (
ETA
).

[2]

Over a two-year period, 24 Gold purchased from Money Mart approximately
    $12.16 million in unrefined gold. 24 Gold did not pay, and Money Mart did not
    collect or remit, HST on those transactions. Several years later, Canada
    Revenue Agency (CRA) issued reassessments to Money Mart requiring the payment
    of $1,573,903.94 in HST. CRA used part of Money Marts corporate tax payments
    to satisfy the HST due.

[3]

Money Mart thereupon demanded that 24 Gold reimburse it for the HST. 24
    Gold refused. Money Mart commenced this action against 24 Gold and its
    principal, Kamel W.L. Hanna, seeking payment of the HST.

[4]

Money Mart moved for summary judgment. 24 Gold resisted the motion,
    arguing that the action was time-barred. The motion judge granted summary
    judgment against 24 Gold for $1,573,903.94.

[5]

24 Gold appeals. For the reasons set out below, I would dismiss 24
    Golds appeal.

II.

FACTS

[6]

The material facts are not in dispute.

[7]

Between July 1, 2010 and June 30, 2012, Money Mart sold unrefined gold
    to 24 Gold pursuant to an oral agreement of purchase and sale. Money Mart
    charged and 24 Gold paid approximately $12.16 million for the goods supplied.
    Money Mart did not deliver invoices at the time of the various sales.

[8]

The sale of the unrefined gold was a taxable supply within the meaning
    of the
ETA
.

[9]

Sections 165(1) and (2) of the
ETA
require every recipient of a
    taxable supply made in Canada to pay tax in respect of the supply calculated at
    the rate of 5% on the value of the consideration of the supply and, in
    participating provinces, additional tax representing the provincial component
    of HST at the prescribed rate. HST is 13% for a taxable supply in Ontario (the
    federal rate of 5%, plus the Ontario provincial sales tax rate of 8%):
ETA,
Schedule VIII. The tax is payable by the recipient on the earlier of the
    day the consideration for the supply is paid or the day the consideration for
    the supply becomes due:
ETA,
s. 168(1).

[10]

24
    Gold did not pay the tax at the time of the transactions. The record does not
    explain why it did not.

[11]

Nor
    did Money Mart pay the HST.

[12]

In
    2015, the CRA audited Money Marts HST returns for the period from July 1, 2010
    to June 30, 2012. By June 2015 the CRA had issued HST reassessments to Money
    Mart on its sale of unrefined gold to 24 Gold requiring the payment of
    $1,573,903.94 in HST.

[13]

That
    tax obligation was satisfied by the CRA applying part of Money Marts 2016
    corporate tax payments against the reassessed amounts.

[14]

On
    May 31, 2015 Money Mart issued two invoices to 24 Gold requiring payment of the
    $1,573,903.94 in HST. Each invoice identified the consideration for the gold
    sales, as well as the HST payable on the transactions. Each invoice noted that
    the (GST/HST) at 13% was not charged in error and [t]he GST/HST is being
    billed to [24 Gold] as a result of Minister issuing an audit assessment to
    National Money Mart for the failure to charge and remit GST/HST on the
    consideration for the taxable supplies of jewellery.

[15]

Some
    discussions ensued in July 2015 and October 2016 between Money Mart and 24 Gold
    regarding a means by which 24 Gold could pay Money Mart the tax. The
    discussions broke down over the issue of 24 Golds ability to claim an input
    tax credit against such tax.

[16]

Money
    Mart commenced this action in December 2016. In May 2017, it moved for summary
    judgment in the amount of the HST collected by the CRA.

[17]

The
    motion judge granted summary judgment in favour of Money Mart.

[18]

24
    Gold advances a single ground of appeal, which involves the interpretation of
ETA
,
    ss. 223(1) and 224. Section 224 specifies several conditions a supplier must
    meet in order to bring an action against a recipient to recover HST paid by the
    supplier. One condition, set out in s. 223(1), requires the supplier to provide
    the recipient with written disclosure of the tax payable. 24 Gold submits the
    motion judge erred by failing to find that s. 223(1) requires such disclosure
    to be given at the time of the supply transaction. Since Money Mart gave notice
    by the two May 2015 invoices issued well after the transactions, 24 Gold
    contends Money Mart failed to satisfy the pre-condition to suit in s. 223(1).
    As a result, 24 Gold contends the order granting summary judgment must be set
    aside.

[19]

Money
    Mart argues that it is not open to 24 Gold to raise that issue on appeal
    because it was not made before the motion judge.

[20]

Accordingly,
    the appeal raises two main issues. First, is 24 Gold raising a new issue? If it
    is, should this court entertain it? Second, if this court considers the new
    issue, did Money Mart fail to comply with
ETA
, ss. 223(1) and 224,
    thereby barring its action? Before addressing those issues, I shall describe
    the role of ss. 223 and 224 of the
ETA
in the overall statutory scheme
    for the payment, collection, and remittance of HST.

III.

THE STATUTORY SCHEME

[21]

The
ETA
defines a taxable supply as one that is made in the course of a
    commercial activity. A supplier is the person making the supply; the
    recipient includes a person who is liable under an agreement to pay
    consideration for the supply: s. 123(1).

[22]

As
    mentioned, ss. 165(1)-(2) and 168(1) of the
ETA
require every
    recipient of a taxable supply to pay HST in respect of the supply on the
    earlier of when the consideration is paid or becomes due.

[23]

The
    person who makes a taxable supply must collect, as agent for the Crown, the HST
    payable by the recipient in respect of the supply:
ETA,
s. 221(1).
    Section 225 contains the rules for calculating the amount of net tax a person
    must pay during a particular reporting period.

[24]

Section
    224 authorizes a supplier to sue a recipient for tax the supplier remitted but
    did or could not collect from the recipient, if it meets certain conditions.
    The section states:

224. Where a supplier has made a taxable supply to a recipient,
    is required under this Part to collect tax from the recipient in respect of the
    supply,
has complied with subsection 223(1)
    in respect of the supply
and has accounted for or remitted the tax
    payable by the recipient in respect of the supply to the Receiver General but
    has not collected the tax from the recipient, the supplier may bring an action
    in a court of competent jurisdiction to recover the tax from the recipient as
    though it were a debt due by the recipient to the supplier. [Emphasis added.]

[25]

Compliance
    with s. 223(1) is one of the conditions a supplier must satisfy before starting
    a collection action against a recipient pursuant to s. 224. Section 223
    concerns the disclosure of tax by a registrant supplier to the recipient.
    Section 223(1) states:

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.

[26]

Money
    Mart did not invoice 24 Gold at the time of each sale. Only after the CRA audited
    Money Marts HST returns did Money Mart send the two May 31, 2015 invoices to
    24 Gold. Each of those invoices indicated the consideration paid by 24 Gold for
    the supply and the tax payable in respect of the supply.

[27]

24
    Gold contends that s. 223(1) requires a supplier to give the notice disclosing
    the tax payable at the time of the supply transaction. If the supplier does
    not, it cannot sue the recipient for the tax pursuant to s. 224.

IV.

FIRST ISSUE: IS 24 GOLD RAISING A NEW ISSUE ON THIS APPEAL? IF IT IS,
    SHOULD THIS COURT ENTERTAIN IT?

(a)

Is 24 Gold raising a new issue on this appeal?

[28]

Money
    Mart submits the sole ground of appeal 24 Gold advances in its new factum is an
    issue that it did not raise below. 24 Gold disagrees. It takes the position
    that the issue was in play below, although it acknowledges that in fairness to
    His Honour, the issue was not well briefed or argued below.

[29]

I
    do not accept 24 Golds submission. A review of its statement of defence, its factum
    before the motion judge, the reasons of the motion judge, its notice of appeal,
    and its first appeal factum reveals that it now seeks to raise a new issue.

[30]

In
    its statement of defence, 24 Gold pleaded two main defences: (i) Money Marts
    claim was barred by a two-year limitation period that 24 Gold contended was
    created by
ETA,
s. 225 (the Section 225 Defence); and (ii) the claim
    also was barred by the two-year limitation period in s. 4 of the
Limitations
    Act
, 2002, S.O. 2002, c. 24, Sched. B (the Limitations Act Defence). Although
    in para. 5 of its statement of defence 24 Gold pleaded that before May 2015
    Money Mart had not provided it with any invoices containing the information
    required by
ETA,
s. 223(1), it did not go on to plead that Money
    Marts non-compliance with s. 223(1) barred it from bringing the action.

[31]

In
    its factum on the summary judgment motion, 24 Gold addressed three legal
    issues: (i) its Section 225 Defence; (ii) the Limitations Act Defence; and
    (iii) an unjust enrichment argument. Its factum did not submit that Money Marts
    action was barred because the supplier had not issued invoices disclosing the
    tax at the time of the transactions.

[32]

The
    motion judge rejected 24 Golds submissions that Money Marts claim was barred
    on the basis of the Section 225 and Limitations Act Defences: at paras. 13, 14
    and 23. The motion judge did not deal with 24 Golds unjust enrichment argument.

[33]

In
    its notice of appeal, 24 Gold states that the motion judge misunderstood its
    Section 225 Defence and erred in rejecting its Limitations Act Defence. Those
    two grounds of appeal formed the subject-matter of its first appeal factum.

[34]

At
    some point after filing its first factum, 24 Gold changed counsel. On April 17,
    2018, it obtained a consent order permitting it to file a new factum and book
    of authorities to replace the factum and book of authorities previously filed
    by the Appellants former counsel.

[35]

In
    its new factum, 24 Gold advances the single ground of appeal described earlier:
    Did the motion judge err in his interpretation of s. 224 and the incorporated
    provisions of s. 223(1) by holding that a supplier can retroactively satisfy
    the obligation to comply with s. 223(1)? As well, the new factum confirms that
    the Limitations Act Defence is not an issue on the appeal. Nor does the new
    factum deal with the Section 225 Defence or the unjust enrichment argument
    advanced below.

[36]

This
    brief procedural history shows that before changing counsel, 24 Gold contended
    that Money Marts s. 224 action was out of time. Now, it takes the position
    that Money Mart started the action without complying with a necessary
    pre-condition specified by s. 224  compliance with s. 223(1). 24 Gold clearly
    is raising a new issue on appeal.

(b)

Should this court consider 24 Golds new issue?

[37]

The
    general principle regarding entertaining new issues on appeal was articulated
    by Weiler J.A. in
Kaiman v. Graham
, 2009 ONCA 77, 245 O.A.C.
    130, at para. 18:

The general rule is that appellate courts will not entertain entirely
    new issues on appeal. The rationale for the rule is that it is unfair to
    spring a new argument upon a party at the hearing of an appeal in circumstances
    in which evidence might have been led at trial if it had been known that the
    matter would be an issue on appeal The burden is on the appellant to persuade
    the appellate court that all the facts necessary to address the point are
    before the court as fully as if the issue had been raised at trial This
    burden may be more easily discharged where the issue sought to be raised
    involves a question of pure law In the end, however, the decision of whether
    to grant leave to allow a new argument is a discretionary decision to be guided
    by the balancing of the interests of justice as they affect all parties
    [citations omitted.]

[38]

Several
    factors favour entertaining the new issue raised by 24 Gold: it involves a pure
    question of law, specifically the interpretation of
ETA
, ss. 223(1)
    and 224; Money Mart was permitted to file a supplementary factum and book of
    authorities, which enabled it to submit materials and commentary about the
    history, interpretation and application of those sections; and the facts
    concerning the supply transactions are not in dispute.

[39]

However,
    Money Mart argues it would be prejudiced if the court entertained 24 Golds new
    issue. Doing so would allow 24 Gold to withdraw an admission that Money Mart
    submits it made in its first appeal factum where, at para. 5(a), 24 Gold stated
    that Money Mart complied with Section 223 of the Excise Tax Act only on May
    31, 2015 when it invoiced [24 Gold] as the recipient for the consideration paid
    and the amount payable for HST.

[40]

To
    the extent that the statement in the first factum constitutes an admission, I
    regard it as an admission of law. The statement assumes that s. 223 does not
    require a supplier to issue an invoice containing the information stipulated in
    the section at the time of a supply transaction. That involves a question of
    law concerning the interpretation of s. 223. A party can withdraw an admission
    of law:
Re Baty
, [1959] O.R. 13 (C.A.), at p. 16; Sidney N. Lederman, Alan
    W. Bryant & Michelle K. Fuerst,
Sopinka, Lederman & Bryant: The Law
    of Evidence in Canada,
5th ed. (Toronto: LexisNexis, 2018), at p. 1388,
    §19.2.

[41]

In
    those circumstances, entertaining 24 Golds new issue will cause no prejudice to
    Money Mart that cannot be compensated for by costs.

V.

SECOND ISSUE: DO SECTIONS 223(1) AND 224 OF THE
ETA
REQUIRE THE
    DISCLOSURE OF THE TAX AT THE TIME OF A SUPPLY TRANSACTION?

(a)

The issue stated

[42]

In
    support of its submission that s. 223(1), properly interpreted, requires the
    invoice or receipt in respect of the supply to be issued to the recipient at
    the time of the supply, 24 Gold advances a long list of arguments:


(i)

the case law is divided on the issue;


(ii)

the use in s. 223(1) of the article the in the phrase the invoice or
    receipt, in contrast to the use of an when referring to an agreement in
    writing, signals, as a matter of logic, that for an invoice to comply with s.
    223(1) it must be issued at the time of the transaction;


(iii)

as a matter of common commercial practice, invoices are issued
    contemporaneously with a transaction, so s. 223(1) should be interpreted in
    that manner;


(iv)

it would be more commercially reasonable to fix the supplier with the
    cost of HST where the parties erroneously believed that HST was not payable on
    a transaction because the supplier likely deals frequently in the type of
    supply and need only determine its taxable status once;


(v)

notice provided after the transaction does not fulfill the purpose of s.
    223(1), which is to give the purchaser an opportunity to consider the
    transactions true cost, namely whether or not the price includes the tax;


(vi)

to interpret s. 223(1) as allowing after-the-fact invoices would create
    a moral hazard by permitting vendors to avoid complying with s. 223(1), thereby
    changing the price for the transaction initially represented by the supplier;


(vii)

such an interpretation also would deny natural justice to recipients
    because they have no ability to participate in assessment proceedings brought
    against the supplier; and


(viii)

uncertainty exists as to whether an input tax credit would be available
    to all recipients in a situation where a supplier issues an after-the-fact
    invoice, so the potential for a recipient to claim an input tax credit does not
    support interpreting s. 223(1) to permit non-contemporaneous invoices.

[43]

I
    propose to deal together with arguments (i) through (v). As I will explain, the
    case law no longer remains divided on the interpretation of s. 223(1), and the
    case law, together with CRA policy and professional commentary, address the
    first five arguments. I shall then consider arguments (vi) through (viii).

(b)

The case law, CRA policy and professional commentary

The case law

[44]

I
    do not accept 24 Golds starting premise that the case law interpreting s.
    223(1) remains divided. While conflicting lower court decisions emerged
    immediately following the introduction of the GST in 1991, a clear
    interpretation of ss. 223(1) and 224 has emerged that recognizes a supplier can
    invoice HST after the fact, subject to any contractual restrictions on doing
    so.

[45]

The
    introduction of the GST in 1991 spawned a number of cases that considered the
    ability of a supplier to recover GST from a recipient on a contract that was
    signed before, but performed or closed after, the GST came into force. Some of
    those cases considered whether giving notice of the tax payable after the initial
    supply contract satisfied s. 223(1).

[46]

One
    of the earliest reported decisions was
390781 Alberta Ltd. v. Mensaghi
,
    [1992] G.S.T.C. 10 (Alta. Prov. Ct.). There, the court reached two conclusions.
    First, the court held that since it was not a term of the contract entered into
    before the GST regime came into force that that the purchaser would pay GST
    over and above the stated purchase price, rectification of the contract to make
    the purchaser responsible for the tax was not available. The court then went on
    to state that
ETA,
s. 223(1) requires a supplier to notify the
    recipient of the tax payable before entering into a transaction. However, that
    statement was made in respect of a contract entered into before the GST regime
    came into effect that was silent as to GST.
Mensaghi
did not involve
    an invoice or other form of notice issued following the supply transaction,
    which is the situation in the present case.

[47]

Many
    of the subsequent cases referred to by the parties that dismissed a suppliers
    action under s. 224 turned not on the timing of the notice given by a supplier,
    but on whether the form of the notice document provided by the supplier met the
    requirements of s. 223(1): see,
Pellizzari v. 529095 Ontario Ltd.
, [1995]
    G.S.T.C. 51 (Ont. Sm. Cl. Ct.), at p. 51-3;
Deep Six Developments Inc. v.
    Kassam
, [1998] G.S.T.C. 36 (B.C.S.C.), at para. 22. Others turned on
    whether the agreement at the time of the supply transaction clearly allocated
    responsibility for GST between the parties:
Dworak v. Kimpton
, [1996]
    G.S.T.C. 97 (B.C.S.C.). In yet another, the supplier had not issued an invoice
    or receipt after the transaction:
Villa Nova Developments v. Hunter
, [1998]
    G.S.T.C. 74 (N.L. Prov. Ct.), at p. 74-2.

[48]

Then
    came the 1996 decision of the New Brunswick Court of Appeal in
OCCO
    Developments Ltd. v. McCauley
, [1996] G.S.T.C. 16 (N.B.C.A.), to date the
    only appellate decision that has considered whether written notice of the tax
    payable given after a supply transaction complies with
ETA,
s. 223(1).

[49]

The
    facts in
OCCO Developments
were typical of a pre/post-GST transition
    case. The recipient signed an agreement to purchase a condominium unit in 1989
    before the GST was enacted. Title did not pass until May 1992, when the GST was
    in force.

[50]

Before
    closing, the vendor asked the purchaser to pay an amount for GST. The purchaser
    did so. Two years later, in 1994, the vendor received a notice of assessment
    stating a further amount of GST was payable. In June 1994, the vendor wrote the
    purchaser asking for payment of the further amount. The purchaser refused. Nor
    did the vendor remit the amount to Revenue Canada, which obtained judgment
    against the vendor for the amount of GST due.

[51]

The
    vendor sued the purchaser pursuant to
ETA
, s. 224 to recover the
    additional amount of GST. The trial judge dismissed the action. Although the
    trial judge held that the vendors post-closing letter to the purchaser
    claiming further GST satisfied s. 223(1), she concluded that the vendor had not
    complied with the further condition in s. 224 that it had accounted for or
    remitted the tax payable by the recipient.

[52]

The
    New Brunswick Court of Appeal allowed the appeal. It dealt with two issues.
    First, the purchaser argued that the trial judge had erred in holding the
    vendor had complied with s. 223(1). The purchaser advanced an argument similar
    to that advanced by 24 Gold in this case: It is [the purchasers] position
    that the amount of GST claimed must be incorporated in the original
    invoice, receipt or agreement, and it cannot be changed subsequently: at
    p. 16-4. In rejecting that submission, Bastarache J.A., writing for the
    majority, stated at p. 16-4:

I do not agree with the very restrictive interpretation given
    to the Act in the above mentioned cases. The Act must be considered as a whole
    and interpreted in a purposive manner in order to give effect to the intention
    of Parliament. It imposes the tax on the recipient of the service, not on its
    supplier. It would therefore be an unreasonable interpretation of s.223(1) to
    limit the sending of a notice of the amount of GST due to documents issued at
    the time the supply was received. My view on this issue is reinforced by the
    fact that the formulation of the obligations in s.223(1) does not reveal any
    intention of Parliament to impose such a restriction. As noted by Alan Shragie
    in "Application of the G.S.T. to Damages and Related Matters",
    Canadian Tax Journal 38 (6) (November-December 1990) 1468 at 1492, it is also
    significant that s.223(1) applies to "registrants" and that this
    categorization cannot extend to persons acting before the coming into effect of
    the GST

[53]

In
    his dissent, Rice J.A. did not quarrel with that conclusion.

[54]

The
    majority and minority parted company over the second issue: the meaning of the
    words accounted for the tax in
ETA,
s. 224. Recall that before
    starting its action, OCCO Developments had not paid the additional GST
    assessed, unlike Money Mart in the present case. Accordingly, there is no need
    to consider the majoritys specific analysis of the words accounted for.

[55]

However,
    other comments made by Bastarache J.A. in the course of dealing with that issue
    assist in understanding the place of ss. 223(1) and 224 in the scheme of the
ETA
.
    At p. 16-5 he wrote, in part:

Section 224 is designed to permit a supplier to obtain payment
    of the amounts of GST it has remitted or is required to remit to Revenue Canada
    as an agent (see: s.221(1)). It seems obvious that where the
Act
provides for assessments by Revenue Canada, it must be deemed to authorize the
    agents of Revenue Canada to collect the moneys they are required to remit as a
    result of the assessments. It would require clear terms to the contrary in
    s.224 to find that Occo is in fact made liable for the payment of the
    additional GST claimed by Revenue Canada because it is precluded from
    collecting the amount in question from the recipient of the supply. This would
    be contrary to s.165(1) and to the purpose of the Act

The effect of the assessment has been a revision of the amount
    owed, not an obligation on Occo to act as though a new supply had been made. I
    would agree with Shragie where he states, at p.1494 of his article, that a
    supplier is able to correct a disclosure deficiency contained in his initial
    document by issuing an invoice or receipt that meets the requirements of s.223.
    This was done in the present case. Nothing in s.224 prevents a supplier from
    claiming additional GST owed following an assessment. The supplier, Occo, has
    made a supply and accounted for the GST. It's determination of the amount owed
    was inaccurate and judged to be too low by Revenue Canada. The result is that
    Dr. McCauley has only paid part of the amount to be remitted by Occo. Section
    224 provides that a supplier can recover the amount of the tax payable, which
    is the total amount claimed by Revenue Canada, and not necessarily the amount
    estimated by the supplier in his first invoice. I therefore find that the
    requirements of s.224 have been met in the present instance and that Occo can
    recover the amount of GST outstanding.

[56]

Counsel
    referred to four cases decided not long after
OCCO Developments
.  The
    first,
Deep Six Developments
, did not refer to
OCCO Developments.
The
    court held, at para. 22, that Revenue Canada correspondence forwarded to the
    purchaser subsequent to the transaction did not meet the requirements of s.
    223(1) because it did not clearly disclose both the amount paid and the tax
    thereon. In contrast, in
Lens Construction Midland Ltd. v. Georgian Bay
    Native Friendship Centre Inc.
, [1998] G.S.T.C. 37 (Ont. Gen. Div.), the
    court held that a suppliers letter demanding payment of GST to a purchaser
    over a year after the transaction had closed satisfied the notice requirements
    of s. 223(1): at p. 37-3.

[57]

OCCO
    Developments
was followed in
Carman v. Jackson
, 1998 ABPC 143, [1999]
    G.S.T.C. 24, where the court found that the delivery of a post-closing revised
    statement of adjustments showing the GST payable satisfied the requirements of
    s. 223(1): at para. 14.

[58]

Then,
    in
Leong v. Princess Investments Ltd.
, [1999] G.S.T.C. 86 (B.C.S.C.),
    the British Columbia Supreme Court applied the reasoning in
OCCO
    Developments
to hold that a notice delivered after the supply transaction
    could satisfy s. 223(1). At para. 27, Dorgan J. wrote:

The authorities appear to favour the view that ss. 223(1)
    exists to enable a purchaser to determine how much tax has been or is payable
    to Revenue Canada.  Consequently, the notice provisions should be construed
    liberally. The provisions in ss. 223(1) contain no reference to notice
    "within a reasonable time". The cases do not turn on how much time
    has passed between the transaction in question and the notification, though
    they are influenced where GST is contemplated by the contract. Notice in the
    form of an invoice, which is defined very broadly, may be provided after the
    fact. The letter of Leong's lawyer dated May 2, 1996 constitutes notice and may
    be considered an invoice in these circumstances.

[59]

Since
    the late 1990s, there have been few reported cases on whether a notice of the
    tax payable given following a supply transaction complies with s. 223(1).
    Counsel did refer to the 2017 decision of the Ontario Superior of Justice in
King
    Road Paving and Landscaping Inc. v. Plati
, 2017 ONSC 557, [2017] G.S.T.C.
    82. The court held that where a contract for goods and services is silent in
    respect of HST, there is an inference that the price does not include HST. In
    the course of its analysis, the court stated, at para. 78:

The case law supports the position that where,
    through oversight or other error, the supplier omits or incorrectly states the
    HST on the contract the recipient of the goods or services remains responsible
    for the full amount of the tax. To conclude otherwise would make the tax
    collector personally liable for the payment of the tax with no right of
    recourse against the tax payor. In this regard I adopt the analysis of Dorgan
    J. in
Leong v. Princess Investments ltd
. and the
    several cases cited therein. [Citations omitted.]

[60]

The
    case law now appears settled, with the prevailing view that expressed by the
    New Brunswick Court of Appeal in
OCCO Developments
 namely, an
    invoice or receipt issued after the supply transaction can meet the
    requirements of
ETA,
s. 223(1).

CRA Policy

[61]

That
    interpretation of s. 223(1) was adopted by the CRA as its policy in 1994,
    before the decision in
OCCO Developments
, and remains its policy today.
    CRA Policy Statement P-116,
Collection of GST, by a Supplier, Where the
    Invoice is Silent on the Tax Payable
, was issued in 1994 and updated in
    1999. The Policy Statement states:

Where there are no contractual or common law restrictions to
    prevent the issuance of amended or additional invoices, the Department will
    continue to accept that the disclosure requirements may be met after the fact.
    This position was adopted since subsection 223(1) of the Act is silent on the
    issue of timing and because many purchasers are agreeable to the extra charge.

[62]

In
    regards to any contractual restrictions, 24 Gold has not taken the position
    that the oral agreements with Money Mart included the tax as part of the
    transaction price. Money Mart raised the issue of the terms of the oral
    agreements in its Statement of Claim by pleading that it was an implied term of
    the agreements that 24 Gold would pay the HST. 24 Gold denied those allegations
    as part of its general blanket denial, but it did not plead specifically that
    it was a term of the contract that HST was included in the transaction prices.
    Its pleaded affirmative defences were much narrower: (i) Money Mart had not
    proved it paid the HST; (ii) the Section 225 Defence; and (iii) the Limitations
    Act Defence. Nor did Mr. Hanna suggest in his affidavit that 24 Gold understood
    the transaction prices included HST.

Professional commentary

[63]

The
    majority in
OCCO Developments
relied on the views expressed by Alan
    Shragie in an article published just prior to the coming into force of the GST,
    Application of the Goods and Services Tax to Damages and Related Matters
    (1990) 38:6 Can. Tax J. 1468. In that article, Mr. Shragie took the position that
ETA
, s. 223(1) permits a registrant to correct a disclosure deficiency
    for purposes of s. 224 by issuing an invoice or receipt that meets the
    disclosure requirements subsequent to the issuance of a deficient initial
    agreement. He offered several reasons for his view: (i) once the consideration
    for the supply becomes due, the recipient is liable for GST whether or not the
    initial contractual document met the s. 223(1) disclosure requirements; (ii) as
    a general rule, all supplies made by a registrant are taxable under the GST
    legislation unless, by way of exception, a supply is designated as exempt;
    (iii) in the case of an oral agreement, there is clearly nothing in section
    223(1) to prevent the supplier from subsequently issuing an invoice or receipt
    that reflects the  consideration payable as well as the  percent tax payable
    in respect of the supply; and (iv) if the supplier is not able to correct a
    disclosure deficiency for purposes of bringing an action, the recipient may
    obtain a windfall: at pp. 1493-1494.

[64]

A
    similar view is expressed by David M. Sherman in
Canada GST Service,
loose-leaf
    (Toronto: Thomson Carswell, 1990) at p. 224-105: Since the purpose of
    subsection 223(1) is merely to ensure that the recipient knows whether GST is
    extra or included, the authors view, consistent with that of the CRA, is
    that the GST can be invoiced after the supply is made.

(c)

Analysis

[65]

Section 223(1) is silent on when a registrant must give disclosure
    of the tax payable to a recipient. The overwhelming weight of the
    jurisprudence, the CRAs Policy Statement P-116, and the professional
    commentary have interpreted that statutory silence to mean that a registrant
    supplier can comply with the s. 223(1) disclosure obligations by delivering an
    invoice or receipt containing the prescribed information after the supply
    transaction.

[66]

I find that interpretation persuasive. I adopt it, accepting the
    reasoning of Bastarche J.A. in
OCCO Developments
, set out at paras. 52 and 55 above, together with that of Mr.
    Shragie and Mr. Sherman. They interpret
ETA
, s.
    223(1) in a manner firmly grounded within the larger purpose, structure and
    workings of Part IX of the
ETA
concerning the
    Goods and Services Tax. Their reasoning answers arguments (i), (ii), (iv) and
    (v) advanced by 24 Gold. While 24 Gold makes additional submissions based on
    commercial practice, those submissions ignore the clear language of the
ETA
that fixes the recipient of a taxable supply with the obligation to
    pay HST in respect of the transaction.

[67]

24 Golds submission that the article the
    preceding the words invoice or receipt in s. 223(1) mandates delivery of the
    tax disclosure notice at the time of the supply transaction strains the
    interpretative implications of a modest article. The article the relied on by
    24 Gold sits in a temporally silent statutory provision which, in turn, is part
    of a tax scheme that charges the recipient with the obligation to pay the tax.
    Accordingly, I do not find the appellants argument persuasive.

(d)

The remaining arguments of 24 Gold

[68]

As
    to 24 Golds remaining arguments  nos. (vi) to (viii) described in para. 42
    above  I would give them no effect.

[69]

First,
    I am not persuaded that interpreting s. 223(1) to allow after-the-transaction
    invoices would create a moral hazard by permitting vendors to avoid complying with
    s. 223(1), thereby changing the price for the transaction initially represented
    by the supplier.

[70]

The parties to a supply transaction can contract
    to have a quoted price be tax-included or tax-extra. If the contract is silent,
    the contract normally is interpreted as treating GST/HST as an extra:
Governors
    Hill Developments Ltd. v. Robert
, [1993] G.S.T.C. 35 (Ont.
    Gen. Div.), at p. 35-2, affirmed in relevant part, [1996] G.S.T.C. 43 (Ont. C.A.);
Lauber c. Reid
, 2016 QCCA 1587, [2016]
    G.S.T.C. 122, at para. 13;
Eco-Zone Engineering Ltd. v. Grand
    Falls-Windsor (Town)
, 2000 NFCA 21, [2000] G.S.T.C. 106, at
    para. 34; David Sherman, ed.,
Practitioners Goods and Services Tax
    Annotated,
37th ed
.
(Toronto: Thomson Reuters, 2018), at p. 486. In response to a collection action
    brought pursuant to s. 224, a recipient can attempt to prove that it was a term
    of the contract that the price included HST. However, 24 Gold did not assert
    such a defence.

[71]

Nor
    am I persuaded that interpreting s. 223(1) as allowing subsequent invoices
    would deny natural justice to recipients because they have no ability to
    participate in assessment proceedings brought against the supplier. It is open
    to recipients to negotiate express terms in their contracts with suppliers that
    allocate the ultimate responsibility for the payment of tax, including
    reassessed tax, as between the parties.

[72]

Finally,
    whether or not any uncertainty exists about the ability of all recipients who
    receive from a supplier a post-transaction notice of tax payable to claim an
    input tax credit has no bearing on the interpretation of s. 223(1). The
    obligation of a recipient to pay HST does not depend upon whether it can claim an
    input tax credit. Section 165(1) imposes an unqualified obligation on a
    recipient to pay HST. While the calculation under
ETA
, s. 225 of the
    net tax payable by a person for a particular reporting period takes into
    account available input tax credits, it does not diminish a recipients
    obligation under s. 165(1) to pay the HST on a taxable supply.

VI.

SUMMARY AND DISPOSITION

[73]

For
    the reasons set out above, I conclude that the two May 31, 2015 invoices issued
    by Money Mart to 24 Gold complied with
ETA
, s. 223(1). Money Mart
    therefore satisfied the conditions in s. 224 to bring this action.

[74]

The
    motion judge rejected the Section 225 and Limitations Act Defences asserted by
    24 Gold. In its second factum, 24 Gold did not challenge those findings. There
    is no dispute that 24 Gold was the recipient of unrefined gold under the series
    of transactions between July 1, 2010 and June 30, 2012. There is also no
    dispute that the HST payable on those transactions was $1,573,903.94, which the
    CRA has collected from Money Mart. In those circumstances, Money Mart is
    entitled to summary judgment against 24 Gold for $1,573,903.94.

[75]

Accordingly,
    I would dismiss the appeal.

[76]

In
    accordance with the agreement of the parties regarding the costs of the appeal,
    I would award Money Mart costs of $20,000, inclusive of disbursements and all
    applicable taxes.

Released: AH Oct 10 2018

David Brown J.A.
I agree. Alexandra Hoy A.C.J.O.
I agree. G.T. Trotter J.A.


