Justice Andromache Karakatsanis, writing for most in Canada (Attorney General) v. Bc Investment Management Corp. 2019 SCC 63, authored that within this situation “there isn’t any question the federal GST falls squarely inside the concept of ‘taxation’ in s. 91(3) from the Metabolic rate Act, 1867, which, like a statutory Crown agent, BCI enjoys the same constitutional immunity according to their property because the provincial Crown does.”
Justice Andromache Karakatsanis
Based on court papers, BCI was produced in 1999 to handle investment portfolios of countless public pension funds. In 2013, the Canada Revenue Agency (CRA) investigated the business and located that BCI owed over $40 million at the spine taxes.
The dispute over taxation began in 2016 when BCI petitioned the B.C. Top Court for any declaration that it is operations were immune from federal Products or services Tax (GST) and Harmonized Florida Sales Tax (HST) underneath the ETA. The Lawyer General of Canada opposed the declaration.
Justice Gary Weatherill, inside a decision released September 2016, determined that “[A]although due to as being a provincial Crown agent bcIMC is immune from taxation by Canada underneath the ETA according to of assets it holds in pooled domain portfolios pursuant towards the Pooled Domain Portfolios Regulation, B.C. Reg 447/99, it’s nonetheless bound through the provisions from the RTA and CITCA respecting individuals assets.”
Canada attracted the B.C. Court of Appeal, quarreling from the lower court judge’s assumption of jurisdiction and the declaration that BCI was immune from federal taxation. Simultaneously, BCI mix-appealed the declaration it had become bound through the provisions from the RTA and CITCA.
Justice Peter Willock, for that B.C. Court of Appeal, determined inside a decision released Feb 2018 to uphold the low court’s ruling and ignored both appeal and also the mix-appeal.
The problem moved its way to the SCC, with Canada still appealing the declaration that BCI is immune from taxation and BCI mix-appealing it is susceptible to the 2 taxation contracts.
Justice Karakatsanis noted the appeal and mix-appeal needed a legal court “to assess the scope from the intergovernmental immunity from taxation put down in s. 125 from the Metabolic rate Act, 1867, and whether contracts joined into by two amounts of government to pay for the same as ‘taxes’ might be binding on other Crown entities.”
The judge described that’s. 125 exists “to prevent one degree of government from appropriating to the own make use of the property from the other, or even the fruits of this property.”
“Intergovernmental immunity from taxation grants each degree of government operational space to control without interference. Additionally, it prevents one number of elected representatives from dictating how another legislative body should allocate the financial sources under its control,” she added.
On appeal, Canada posted that’s. 125 immunity applies “only towards the extent the property held through the Crown representative is open to discharge a government function.”
“Applying this test, Canada states the monies invested through the public sector pension boards fall outdoors the scope of s. 125,” a legal court noted.
Justice Karakatsanis described the “difficulty with this particular submission is it disregards the federal government objective underlying the Portfolios’ existence.”
“The Portfolios were produced to permit the Province along with other approved entities to pool their monies for diversified investment,” she authored, adding the domain portfolios, “including the Bc legislature’s option to vest legal title from the Portfolio assets in BCI as trustee, fall inside the ‘operational space’ that’s. 125 immunity from taxation affords towards the Province and BCI.”
In dismissing the appeal, Justice Karakatsanis stressed that Canada’s argument that tax fairness between Crown and non-Crown suppliers like a reason to not apply s. 125 is “difficult to square with the presence of the RTA.”
“According to the RTA’s preamble, certainly one of its primary purposes would be to address competitive inequities between government and non-government suppliers. If Crown immunity from taxation relied on whether or not this would create competitive inequity, there’d be no requirement for voluntary contracts like the RTA. As a result, neither fairness nor the potential of hindering tax neutrality underneath the federal ETA provides any grounds for restricting the constitutional protection granted towards the Province by s. 125,” she authored.
She further stressed the ETA “uses a legitimate fiction to want a trust to pay for tax on taxed services presented to it by its trustee.”
“However,” she added, “when the trustee is a provincial Crown agent, this mechanism runs afoul of s. 125 since it imposes a tax on the property legally of the Crown. The ETA doesn’t impose GST on the distinct private advantageous possession curiosity about this situation. Therefore, the ETA is constitutionally inapplicable towards the Portfolios.”
In dismissing the mix-appeal, Justice Karakatsanis noted that they agreed with Justice Willcock the language from the RTA and CITCA “demonstrates the Province and Canada meant to create mutually binding obligations.”
“Although otherwise constitutionally immune in the ETA ’s operation, the Province under your own accord decided to pay GST to Canada. I additionally agree to the court of Appeal that’s. 16(6) from the PSPPA [Public Sector Pension Plans Act] is broad enough to encompass the liability assumed through the Province underneath the Contracts. Because of s. 16(6) ties BCI’s tax immunities and obligations to individuals from the Province, BCI is usually susceptible to the obligations put down within the Contracts towards the same extent the Province is,” she described.
In her conclusion, Justice Karakatsanis noted that because Part IX from the ETA “attempts to want a provincial agent to pay for tax from property legally held through the Crown, s. 125 from the Metabolic rate Act, 1867, renders the appropriate ETA provisions inapplicable according to the Portfolios.”
“However, like a statutory Crown agent and under s. 16(6) from the PSPPA, BCI is susceptible to the obligations assumed through the Province underneath the RTA and CITCA,” she stressed.
Chief Justice Richard Wagner
Chief Justice Richard Wagner, the only real judge to dissent, agreed with Justice Karakatsanis that BCI is bound through the intergovernmental taxation contracts between Bc and Canada. However, he could not agree around the issue of immunity under s. 125.
Justice Wagner authored there are two needs for any provincial or federal Crown to create an effective s. 125 claims.
“First, the impugned charge must constitute ‘Taxation’ inside the concept of ss. 91(3) and 92(2) from the Metabolic rate Act, 1867,” he noted, adding the taxation forces in individuals sections are susceptible to s. 125.
“There isn’t any dispute within this situation the charge Canada seeks to levy around the Portfolios (the GST) constitutes taxation. Therefore, the dispute before the Court concerns the 2nd requirement of an effective s. 125 claim: whether the topic from the taxation – Portfolios – is property ‘belonging’ towards the Crown or its agent, within this situation BCI. To find out whether this second requirement is met, it’s important to think about the needs of s. 125,” he authored, adding the appropriate section protects “two constitutional values: federalism and democracy.”
Justice Wagner stressed that, within this situation, “the property doesn’t fit in with the Crown as s. 125 requires.”
“Section 125 doesn’t immunize property that personal parties have placed using the Crown to carry in trust for his or her sole take advantage of a tax on the services they have contracted to get in the Crown according to this property. During these conditions, the home in substance belongs to not the Crown but towards the private parties, and also the Crown’s legal title as trustee doesn’t trigger the immunity,” he described, concluding he allows the appeal around the immunity issue.
Craig Ferris, someone at Lawson Lundell LLP in Vancouver and counsel for BCI with Lisa Peters, Gordon Brandt, and Michael Sorkin, stated the choice is very essential in informing lawyers who coping governmental entities, Crown agents that “have a property that could be looked at Crown property.”
As the mix-appeal was ignored, he stated, a legal court “left the majority of the issues open and also the expectation from your side would be that the authorities, searching in the decision, getting been confronted with a business which has now been discovered to be constitutionally immune, would apply individuals contracts in that way. Not one other entity that’s constitutionally immune is needed under individual contracts to pay for GST.”
“The takeaway is, think just a little broadly concerning the entity that you’re coping with and just what immunities you can assert, which the home in a trust, if it features a character of Crown property, is probably immune from the use of GST,” he added.
Ferris stated there are numerous structures of public-sector pension fund managers across Canada, along with other governments will always be liable to check out structures using their company provinces and “perhaps reconstitute their very own holdings to benefit from structures which have now been authorized by the Top Court of Canada as creating constitutional immunity.”
“It wouldn’t surprise me if other provinces required a glance at this and regarded whether there should be some alterations in their legislative structure,” he described.