Business

After finding that the taxpayer’s sale of the new home, which she had constructed, was the result of an adventure in the nature of trade and a taxable supply, Friedlander J. then addressed the issue of whether the taxpayer was entitled to an ITC for HST on the commission charged to her on the sale, notwithstanding that she had not registered for HST purposes.

Friedlander J noted that the definition of “commercial activity” in s. 123(1), distinguished between a business carried on by a person and an adventure or concern in the nature of trade, and found that the taxpayer was not required by s. 240(1) to be registered as a result of her taxable supply by way of sale of the property given the exception in s. 240(1)(b) from that requirement where the sale was “otherwise than in the course of a business.” Thus, the taxpayer did not satisfy the “person who … is required to be registered” branch of the “registrant” definition in s. 123(1).

Before finding that the individual appellant had constructed a home for personal use and not as a builder and, in particular, not as part of an adventure in the nature of trade or in the course of a business, so that the individual was not required to self-assess under s. 191(1) upon substantial completion and occupancy, Sommerfeldt J stated (at para. 30):

[T]he definition of “business” in the ITA states that, except for certain specified purposes, the word “business” includes an adventure or concern in the nature of trade; however, the definition of “business” in the ETA does not contain that particular inclusion. For the purposes of these Reasons, without making a definitive decision in this regard, I will assume that the word “business,” as defined in the ETA, does not include an adventure or concern in the nature of trade. That assumption is consistent with the drafting structure in the concluding portion of paragraph (f) of the definition of “builder” [ in s. 123(1)].

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In 1995 Mr. West incorporated Peruvian and New Brunswick lottery businesses. In 2008 the corporations executed assignment agreements giving the Appellant the right to any proceeds from four different legal actions in which the Peruvian or the NB Corporations were still involved. According to the agreements, the Appellant was to help to resolve the legal disputes, pay all of the legal fees and costs and would be entitled to all proceeds from the assigned actions. The Minister denied the claim of the Appellant for input tax credits (“ITCs”) relating to legal fees paid between July 1, 2008 and March 30, 2011.

After quoting (at para. 27) Kaye v The Queen, 98 DTC 1659 that

if you want to be treated as carrying on a business, you should act like a businessman

Ouimet J dismissed the appeal on the basis that the Appellant did not acquire the legal services in the course of commercial activities, stating (at paras. 29 and 30):

…I believe it would not have made any commercial sense for the Appellant to get involved in a business that…it knew nothing about[,] to go into a business/commercial activity without having made proper financial projections and drawn up a business plan[,]…to sign an assignment agreement giving it control of a legal action that had already been resolved[,]…to give back the control of the legal proceedings to Mr. West while paying the legal fees and costs associated with those proceedings [or]… to let Mr. West pay the costs awarded by a court decision in relation to one of the assigned proceedings.

Before finding (at para. 93) that the appellant (U of C), which was a public service body “carried on a single business, namely, the operation of a university, and that it carried on all of its activities in the course of this business,” D’Arcy J stated (at para. 92):

Under the GST Act, a person’s business is broader than the person’s commercial activity. A business includes all of the activities of a person regardless of whether the activities involve the making of taxable supplies or of exempt supplies. This is an important distinction for the purposes of various provisions of the Act, including the input tax credit apportionment rules contained in section 141.01.

The taxpayer let her neighbour's cattle graze on her pasture in consideration for a monthly fee per head, and agreed with her neighbour that he could crop-share her hay field. In finding that the activities of the taxpayer with respect to the pasture went beyond what was normally expected of the landlord in the maintenance of her rental property, Sheridan J. noted that the taxpayer cut brush and weeds along the fence line, trapped moles, harrowed the pasture to remove their burrows, kept water troughs full and salt supplies replenished. In finding that the taxpayer also was engaged in business activity with respect to the hay field, he noted that she had to fertilize and harrow the hay field and decide how often the hay should be cut in order to maximize the field production. In addition, her own equipment was used in the hay production and harvest and she cut brush, bailed hay and hauled bails.

The trustee in bankruptcy for a company ("Castor") which had essentially only engaged in investing in high-yield loans brought an action in its capacity of trustee for the Castor estate against the former auditors ("C&L") for $40 million in damages for breach of contract, and also began a "litigation support business" of providing assistance to most of the creditors (the "Participating Creditors"), including hiring professionals and experts, in connection with their action sounding in negligence against C&L for $800 million in damages. To the extent that, on settlement of the litigation, Richter was not able to recover its costs out of the proceeds of an award made to it on its own claim, Richter at such time would invoice the creditors for its remaining unrecovered costs, to be paid by set-off against loans they had made to it in the interim.

After noting (at para. 21) that "the word ‘undertaking' has been defined in … Drumheller v. M.N.R., 59 DTC 1177, 1180 (Exch. Ct.), as embracing ‘. . . trades, manufactures, professions, or callings, and any other conceivable kinds of enterprise as well," Archambault J stated (at para. 32):

[T]he litigation support services to the Participating Creditors constitute, if not a profession as defined in the Maxse case [[1919] 1 K.B. 647], at least an undertaking as this term is used in the definition of a "business". Given the nature of these activities and the continuous involvement required from the Estate in order to provide the services during the relevant period and that will be required from it in future years, this undertaking amounts to a business being carried on by the Estate.

See summary under s. 141.01(2).

In finding that the taxpayer, which exercised delegated powers to issue licenses and certificates to its members and exercised public control over those engaged in financial services, auditing and insolvency practice, was not engaged in a "business", Beldam L.J. referred to community jurisprudence that rested on the touchstone of "economic activities" and then stated (at p. 5365):

"... The concept of 'an economic activity' is an activity which typically is performed for a consideration and is connected with economic life in some way or another. But it is not an essential characteristic that it should be carried on with a view to profit or for commercial reasons but it must be an activity which is analogous to activities so carried on. An activity which consists in the performance of a public service to which the idea of commercial exploitation with a view to profit or gain is alien is not of an economic nature particularly where the activity is one typically of a public authority."