CLUB INTRAWEST, Appellant, v. HER MAJESTY THE QUEEN,, 2016 TCC 149

Docket: 2012-3401(GST)G BETWEEN: CLUB INTRAWEST, Appellant, and HER MAJESTY THE QUEEN, Respondent . Appeal heard on November 24, 25 and 26, 2014 at Vancouver, British Columbia and on January 27, 2015 at Ottawa, Ontario Before: The Honourable Justice Steven K. D'Arcy Appearances : Counsel for the Appellant: Chia-yi Chua Wendy A. Brousseau John C. Yuan Counsel for the Respondent: Lynn M.

Burch Shannon Currie JUDGMENT In accordance with the attached reasons for judgment: The appeal from the assessments with regard to monthly reporting periods ending on October 31 for each year from 2002 to 2007, made under the Excise Tax Act , notices of which are dated August 19, 2010 for the October 2007 monthly reporting period and August 20, 2010 for the October monthly reporting period for each of the years 2002 to 2006, is dismissed. The appeal from the assessment with regard to the monthly reporting period ending on October 31, 2008 is quashed.

The parties have thirty days from the date of this judgment to make representations with respect to the amount of costs that the Court should award to the Respondent. If no submissions are received, costs shall be awarded to the Respondent as set out in the Tariff. Signed at Ottawa, Canada, this 9th day of June 2016. “S. D’Arcy” D'Arcy J. TABLE OF CONTENTS I. Introduction.................................................................................................. 1 II. Witnesses...................................................................................................... 3 III.

Summary of Facts...................................................................................... 4 Transfer of Vacation Homes to the Appellant......................................... 6 The Canadian Developer’s and U.S. Developer’s involvement with the sale of the Intrawest Program................................................................................... 9 Sale of Resort Points............................................................................. 10

The Annual Resort Fee.......................................................................... 11 Other supplies of the Vacation Homes.................................................. 15 IV.

First Issue: Whether the Appellant acquired numerous goods and services as agent for the Members of the Appellant....................................................................... 16 The Law................................................................................................ 17 Tax levied under Division II of the GST Act .................................. 17 Principal/Agent Relationship......................................................... 18 Authority of the Appellant to affect a Member of the Appellant’s legal position 20 Transfer of Canadian Vacation Homes from the Canadian Developer to the Appellant....................................................................................... 22 Transfer of U.S./Mexico Vacation Homes to the Appellant .......... 26 Did either the Canadian Developer or the U.S.

Developer Transfer beneficial interests in the Vacation Homes to the Resort Point Purchasers? .. 26 Did the Appellant Transfer beneficial interests in the Vacation Homes directly to the Resort Point Purchasers? ............................................................... 28 Conclusion..................................................................................... 31 Consent of both principal and agent..................................................... 32 The items that comprise the Annual Resort Fee............................ 38 Wording in the By-laws and Master Declaration........................... 38 Ability of the Canadian Developer to avoid paying the Annual Resort Fee 39 Control.................................................................................................. 39 Conclusion............................................................................................ 41 V.

Second Issue: Was the supply made in Canada?.................................... 42 Legislative inconsistency in

section 142................................................ 42 Supply of a service or of intangible personal property?....................... 48 Did the Appellant make a single supply or multiple supplies in consideration of the Annual Resort Fee?............................................................................... 53 Taxation of the supply of a service that relates to real property in Canada and real property outside of Canada................................................................... 55 Is the supply before the Court deemed to be made in Canada?............. 66 VI.

Third Issue: Whether the Minister followed the provisions of the GST Act when calculating the Appellant’s net tax................................................................ 67 VII. Conclusion.............................................................................................. 72 Citation: 2016 TCC 149 Date: 20160609 Docket: 2012-3401(GST)G BETWEEN: CLUB INTRAWEST, Appellant, and HER MAJESTY THE QUEEN,

Respondent. REASONS FOR JUDGMENT D'Arcy J. I. Introduction [ 1 ] The Minister has assessed the Appellant in respect of its monthly reporting period ending on October 31 for each year from 2002 to 2007. The appellant also filed an appeal for its monthly reporting period ending on October 31, 2008.

I quashed that appeal at the commencement of the hearing with the consent of the Appellant. [ 2 ] As stated in the Amended Partial Agreed Statement of Facts and Issues (the PASF ), the Appellant “ was created to facilitate the administration and operation of resort accommodations in connection with a vacation accommodation ownership plan. . . ” (the Intrawest Program ). [1] [ 3 ] The issues in this appeal arise from transactions between the following parties: - The Appellant. - Intrawest Resort Ownership Corporation and its successor corporations, Intrawest Corporation and Intrawest ULC (individually and collectively referred to as the Canadian Developer) . - Intrawest Resort Ownership U.S.

Corporation and Resort Ventures L.P (jointly referred to as the U.S. Developer ). - Certain third parties situated in Canada who entered into an agreement with the Canadian Developer that allowed them to participate in the Intrawest Program ( Canadian Resort Point Purchasers) . - Certain third parties situated in the United States who entered into an agreement with the U.S.

Developer that allowed them to participate in the Intrawest Program (the American Resort Point Purchasers) . [ 4 ] The appeal relates to the following issues that arise in respect of the Appellant’s participation in the Intrawest Program : - Whether the Appellant acquired numerous goods and services as agent for the Canadian Resort Point Purchasers, the American Resort Point Purchasers, the Canadian Developer, and the U.S.

Developer (collectively referred to as the Members of the Appellant ). - If the Appellant did not acquire the numerous goods and services as agent for the Members of the Appellant, o What was the nature of the supply made by the Appellant to the Members of the Appellant? Specifically, was it a supply of intangible personal property or of a service? o How do the place-of-supply rules contained in

section 142 of

Part IX of the Excise Tax Act (the GST Act ) apply to a supply of intangible personal property or a service that relates to both real property situated in Canada and real property situated outside of Canada? - Whether the Minister followed the provisions of the GST Act when calculating the Appellant’s net tax . II. Witnesses [ 5 ] The Appellant called two witnesses, Mr. Robert Keith Thompson and Ms. Sandra Ruff. [ 6 ] Mr. Thompson is a retired lawyer. He informed the Court that, starting in 1993, he acted for Intrawest Corporation (the parent company of the Canadian Developer) and the Canadian Developer. Mr.

Thompson informed the Court that his clients, Intrawest Corporation and the Canadian Developer, were waiving privilege with respect to discussions he had had with them relating to the establishment of the Appellant and the drafting of documents regarding the establishment of the Appellant. [2] [ 7 ] Most of Mr. Thompson’s testimony involved the identification of certain documents that he drafted on behalf of the Canadian Developer. The PASF discusses the majority of these documents. [ 8 ] Mr. Thompson testified that he did not act for the Appellant.

In addition, he was not involved in the transactions between the Canadian Developer and Canadian Resort Point Purchasers pursuant to which the Canadian Resort Point Purchasers purchased their interests in the Intrawest Program. [3] [ 9 ] Ms. Ruff is an accountant who works for a division of the Canadian Developer. Specifically she is the Vice-President of Finance of the Intrawest Resort Club Group division of the Canadian Developer.

The majority of her testimony related to the calculation of an annual fee that the Appellant bills to the Members of the Appellant (the Annual Resort Fee ). [ 10 ] I found both witnesses to be credible.

[ 11 ] The Respondent called three witnesses: Mr. Jaya Abraham, Ms. Brenda Ewing and Mr. Dennis Lum. [ 12 ] Mr. Abraham and Ms. Ewing are Canadian Resort Point Purchasers. In 2008, subsequent to the assessed periods, Ms. Ewing was a sales representative for the Canadian Developer. [ 13 ] Mr. Lum is a large-business auditor and has worked for the CRA for 25 years. [ 14 ] I found all of the Respondent’s witnesses to be credible. III.

Summary of Facts [ 15 ] The Appellant is a non-profit, non-stock corporation that was established on November 9, 1993 under the laws of the state of Delaware in the U.S.A. The Appellant is a GST registrant and its mailing and business address is 326-375 Water Street, Vancouver, British Columbia. [4] [ 16 ] When assessing the Appellant, the Minister assumed that the Appellant was at all material times a resident of Canada.

The Appellant did not provide any evidence to rebut this assumption. [ 17 ] Paragraph 14 of the PASF notes that the following documents govern the Intrawest Program: - Exhibit A-1, Table 1: The table contains an agreement entitled, FOURTEENTH AMENDED AND RESTATED Master Declaration for Club Intrawest entered into by the Appellant and the Canadian Developer (the Master Declaration ). - Exhibit A-1, Table 13: The table contains two documents: the Certificate of Incorporation for the Appellant with amendments (the Incorporation Documents) and the by-laws of the Appellant (the By-laws ). - “ The agreements governing the trust arrangements described. . .in paragraph 19 ” of the PASF.

Paragraph 19 states the following: When the developer [the Canadian Developer] transferred a vacation home in Canada to the Club [the Appellant], legal title to the vacation home was transferred to a trust company created under Canadian law, as trustee for the Club [the Appellant]. When the U.S. developer transferred a vacation home in the United States or Mexico to the Club [the Appellant], legal title to the vacation home was transferred to a trust company created under U.S. law, as trustee for the Club [the Appellant].

I will refer to the trust agreement involving the Canadian Developer and the Appellant as the Canadian Bare Trust Agreement and the agreement involving the U.S. Developer and the Appellant as the U.S.

Bare Trust Agreement . - Exhibit A-1, Table 6: “ the guidelines setting out the rules applicable to members in connection with the Intrawest program. ” (the Membership Guidelines ) - Exhibit A-1, Table 8: The document entitled Purchase and Membership Agreement which agreement was entered into by the Canadian Developer and a Canadian Resort Point Purchaser (the Canadian Purchase and Membership Agreement ) - Exhibit A-3: A document entitled Membership Certificate [ 18 ] As noted in paragraph 13 of the PASF, the parties are satisfied that the documents at Exhibits A-1 and A-2 are materially representative of these documents for the period between 2002 and 2007.

I assume that the Membership Certificate, Exhibit A-3, is also materially representative of that document for the period between 2002 and 2007. [ 19 ] The Canadian Developer established the Appellant and created the Intrawest Program in 1993.

During the relevant period, the program involved vacation homes located in resorts in Canada (the Canadian Vacation Homes) , the United States and Mexico [5] (the U.S./Mexico Vacation Homes ). [ 20 ] It is my understanding that the Canadian Vacation Homes and the U.S./Mexico Vacation Homes (which I will refer to together as the Vacation Homes ) are studio, one, two, and three bedroom condominium units in the various resorts. [6] [ 21 ] The Canadian Developer either built or purchased the Canadian Vacation Homes. [7] It appears that the U.S.

Developer either built or purchased the U.S./Mexico Vacation Homes. [8] As I will discuss, the Canadian Developer and the U.S. Developer transferred their respective interests in the Canadian Vacation Homes and the U.S./Mexico Vacation Homes to the Appellant. [ 22 ] The Appellant retained the Canadian Developer to manage and operate the Canadian Vacation Homes and the U.S./Mexico Vacation Homes. [9] Transfer of Vacation Homes to the Appellant [ 23 ] Each of the Canadian Developer and the U.S. Developer transferred individual Vacation Homes to the Appellant.

The Appellant paid for the Vacation Homes by transferring the occupancy rights to the Vacation Homes, in perpetuity, to the Canadian Developer and the U.S. Developer respectively. [10] I received very little detailed evidence with respect to these key transactions. [ 24 ] The PASF notes the following: 7. When the developer(s) [the Canadian Developer] transfer a vacation home, either built or acquired, to the Club [the Appellant], it is transferred in exchange for the number of resort points required for the right to occupy and use the vacation home for an entire

year. [11] . . . 12. The point values for the right to occupy and use the vacation home at a particular resort are determined before the developer(s) [the Canadian Developer] transfer the vacation home to the Club [the Appellant]. [ 25 ] I have concluded from paragraphs 7 and 12 of the PASF, and after reading

section 2.1(

a) of Exhibit A-1, that the Canadian Developer transferred Vacation Homes to the Appellant in consideration of the occupancy rights, in perpetuity, to the Vacation Home. The occupancy rights are evidenced by a point system. According to paragraph 11 of the PASF, the Canadian Developer determines the actual number of points that represent the value of occupancy of a home for each day in a year (the Resort Points) . [ 26 ] While paragraphs 7 and 12 of the PASF refer only to the Canadian Developer, I assume that the U.S.

Developer received the same consideration when it transferred U.S./Mexico Vacation Homes to the Appellant. [ 27 ] The Appellant did not provide the Court with any of the actual transfer agreements used by the Canadian Developer to transfer Canadian Vacation Homes to the Appellant (the Canadian Vacation Home Transfer Agreement ), or used by the U.S. Developer to transfer U.S./Mexico Vacation Homes to the Appellant (the American Vacation Home Transfer Agreement ). The Appellant’s counsel argued that the Master Declaration effected the transfers. I do not agree.

While the Master Declaration permits the transfers to take place, it is not an agreement that actually transfers the Vacation Homes to the Appellant. The Master Declaration does not contain basic clauses that are required in order to effect a transfer of a specific Vacation Home, such as a consideration clause, a date-of-transfer clause and a clause that specifies the interests that are being transferred. Mr.

Thompson confirmed to the Court that the transfers were effected by documents that are not before the Court. [12] [ 28 ] In addition, the Appellant did not call as a witness an employee, officer, or director of the Canadian Developer, the U.S. Developer or the Appellant who had knowledge of the terms of these agreements.

In fact, the Appellant did not call any employees, officers or directors of the Appellant to testify before the Court. [ 29 ] As a result, as I will discuss, it is not clear to the Court what beneficial interests in the Vacation Homes, or responsibilities with respect to the Vacation Homes, were retained by the Appellant under the two transfer agreements. [ 30 ] As discussed previously, when the Canadian Developer transferred a Canadian Vacation Home to the Appellant, legal title was transferred to a trustee pursuant to the Canadian Bare Trust Agreement. When the U.S.

Developer transferred a U.S./Mexico Vacation Home to the Appellant, legal title was transferred to a trustee pursuant to the U.S. Bare Trust Agreement. [ 31 ] The Appellant provided the Court with a copy of the Canadian Bare Trust Agreement between the Canadian Bare Trustee, the Canadian Developer and the Appellant.

Section 2.1 of the trust indenture states the following: 2.1 Appointment: The Club [the Appellant] appoints the Trustee as its bare trustee to hold legal title to the Resort Accommodation in trust for and on behalf of the Club [the Appellant] in accordance with the terms of this Agreement. The Trustee accepts the appointment and declares that: (

a) It will hold legal title to the Resort Accommodation in trust for the Club [the Appellant] in trust as bare Trustee for and on behalf of the Club [the Appellant]; and (

b) It will hold no beneficial interest in the Resort Accommodation and that all the equitable and beneficial interest in the Resort Accommodation will be vested solely and exclusively in the Club [the Appellant] for the benefit of the Club [the Appellant] and its Members. [13] [ 32 ] The Court was not provided with a copy of the U.S. Bare Trust Agreement. It appears, from the evidence before me, that the U.S. Bare Trustee held the legal title in the Vacation Homes in trust as bare trustee for and on behalf of the Appellant. [14] The Canadian Developer’s and U.S.

Developer’s involvement with the sale of the Intrawest Program [ 33 ] The Canadian Developer markets and sells the Intrawest Program in Canada. [15] The U.S.

Developer markets and sells the Intrawest Program in the United States. [16] [ 34 ] The PASF provides the following description of the Canadian Developer’s involvement in the program: - The Canadian Developer assigns “ a point value ” (Resort Points) to the right to occupy one day in each [Vacation Home], with possible variations in assigned point value for the particular [Vacation Home], depending on which of five Intrawest program seasons – holiday season, peak season, activity season, relax season and opportunity season-the particular day falls within. [17] - The Canadian Developer then sells, in Canada, Resort Points to Canadian Resort Point Purchasers. [ 35 ] The PASF states that the Canadian Developer is a member of the Appellant. [18] It is not clear to the Court when or how the Canadian Developer acquired this membership. [ 36 ] I did not receive any evidence with respect to the U.S.

Developer’s involvement in the assignment of point values to the U.S./Mexico Vacation Homes. [ 37 ] The only reference in the PASF to the U.S. Developer’s involvement in the Intrawest Program is the statement in paragraph 5

that the U.S. Developer markets and sells the Intrawest Program in the United States. [ 38 ] The PASF does not state whether the U.S. Developer is a member of the Appellant. However,

section 1.34 of the Master Declaration states that “ ‘ Member’ means Resort Point Members and Advantage Members (collectively the Resort Point Purchasers), [19] together with the Declarant, with respect to the Declarant’s Resort Points and the Declarant’s Advantage Interests.” Pursuant to sections 1.4 and 7.3 of the Master Declaration, Advantage Members are, generally speaking, Resort Point Purchasers who have special occupancy rights. [20]

Section 1.18 of the Master Declaration defines Declarant as including the Canadian Developer and its appointees.

Section 1.6 of the Master Declaration states that ‘ Appointee’ means Intrawest Resort Ownership U.S. Corporation, Resort Ventures, L.P [the U.S. Developer]. In

summary, pursuant to the Master Declaration, the U.S. Developer is a member of the Appellant. Sale of Resort Points [ 39 ] The Canadian Developer and the Canadian Resort Point Purchasers entered into the Canadian Purchase and Membership Agreement.

Section 2 of the agreement provides that the Canadian Resort Point Purchaser agrees to purchase, and the Canadian Developer agrees to sell, a specific number of Resort Points. [21] For the purposes of the Canadian Purchase and Membership Agreement, Resort Points are defined as “ the currency of use at the Club [the Appellant] through which Resort Point Members reserve occupancy of Resort Accommodation in accordance with the Club Instruments. ” [22] [ 40 ] The Canadian Purchase and Membership Agreement also provides that “ on the purchase of the Resort Points, the Purchaser [the Canadian Resort Point Purchaser] shall be admitted as a Member of the Club [the Appellant] at no additional cost. ” [ 41 ] The parties did not file with the Court the agreements that the U.S.

Developer entered into with the American Resort Point Purchasers when the U.S. Developer sold Resort Points to the American Resort Point Purchasers. I assume that the American Resort Point Purchasers, when purchasing Resort Points from the U.S.

Developer, acquired a membership in the Appellant. [ 42 ] The Canadian Resort Point Purchasers and the American Resort Point Purchasers (referred to collectively as the Resort Point Purchasers ), may occupy the Vacation Homes “ during a particular year by applying their resort points available to use that year towards a vacation home at a resort based on the assigned point values for each day and size of vacation home chosen ”. [23] [ 43 ] The taxation of the sale of Resort Points is not before the Court.

The issue before the Court is the taxation of the Annual Resort Fee paid by the Members of the Appellant. [ 44 ] Paragraph 21 of the PASF states the following: 21. The principal rights that a member has in connection with the Intrawest program are the following: (

a) the right to use resort points held by the member to reserve the use of the vacation homes in accordance with the Guidelines as established by the developer [the Canadian Developer]; (

b) the right to vote at annual general meetings of the Club [the Appellant], including the election of directors of the Club [the Appellant] and on any other Club matters that require member approval pursuant to the by-laws; and (

c) in the event of wind-up and dissolution of the Club [the Appellant], the right to receive a distribution of the net proceeds from the liquidation of the assets of the Club [the Appellant] that is in proportion to the ratio of the member’s resort points to all resort points. The Annual Resort Fee [ 45 ] Paragraph 22 of the PASF states: “ Each member [the Canadian Developer, the U.S. Developer, the Canadian Resort Point Purchasers and the American Resort Point Purchasers] is liable to pay an annual assessment to the Club [the Appellant] to meet ‘Membership Costs’ as defined in the master declaration. ” [ 46 ]

Section 1.37 of the Master Declaration states: “‘ Membership Costs’ means and includes all costs incurred by the Club [the Appellant] for and on behalf of the Members [the Members of the Appellant] as provided in

Section 10.3 hereof. ” [24] [ 47 ]

Section 10.2 of the Master Declaration states: “ Each Member, including the Declarant [the Canadian Developer] and each Appointee [the U.S. Developer] and a Lender of Record acquiring a Membership as a result of enforcement of its security interest, shall be required to pay a Resort Fee for each Membership owned. ”

Section 1.50 of the Master Declaration states: “‘ Resort Fees’ means the annual assessment levied by the Board upon all Members [the Members of the Appellant] for their proportionate share of the annual Membership Costs. ” [25] [ 48 ] As a result, the Canadian Resort Point Purchasers, the American Resort Point Purchasers, the Canadian Developer and the U.S. Developer satisfy the obligation to pay the annual Membership Costs when each pays the “ Resort Fees ” [i.e. the Annual Resort Fee]. [ 49 ] Paragraphs 25 to 38 of the PASF provide a general description of the calculation of the Annual Resort Fee.

These paragraphs are attached hereto as Appendix A. The facts contained in these paragraphs may be summarized as follows: - The Annual Resort Fee payable by a Member of the Appellant is a dollar amount per Resort Point for the particular calendar year multiplied by the number of Resort Points owned by the particular person. [26] - The Appellant, through its board of directors, establishes the per-Resort-Point rate for a calendar year by dividing the budgeted costs for the particular year by the total amount of Resort Points issued by the Appellant.

The per-Resort-Point rate is subject to the limitation in the Master Declaration with respect to the maximum rate per Resort Point that the Appellant is entitled to assess for a particular year. [27]

-

Section 10.5 of the Master Declaration states that the Annual Resort Fee may not exceed a certain amount and provides rules for determining the maximum amount. [28] - Paragraphs 36 and 37 of the PASF deal with Members of the Appellant who have not paid the Annual Resort Fee by its due date. Those paragraphs state the following: 36. All resort fees must be current in order for a member to make reservations using their resort points, to bank, borrow or transfer resort points, to use vacation homes, or maintain any other member rights or privileges. 37.

Members who fail to pay their resort fees by the due date are in default. In the event of default, the Club [the Appellant] may exercise its right to forfeit the defaulting member’s membership. - Paragraph 38 of the PASF notes that the payment of the Annual Resort Fee does not entitle members to any additional rights or privileges. [ 50 ] Ms. Ruff provided additional evidence with respect to the calculation and payment of the Annual Resort Fee. [ 51 ] She testified that the budgeted costs are determined in September of each year being based upon the estimated costs for the next year.

For example, the budgeted costs used to calculate the Annual Resort Fee for the 2003 calendar year were determined by the end of September 2002. [29] [ 52 ] The Appellant uses the budgeted costs to determine a cost per outstanding Resort Point, that is, a cost for Resort Points held by the Canadian Developer, the U.S. Developer, the Canadian Resort Point Purchasers and the American Resort Point Purchasers.

For example, the Appellant determined in September 2002 that the cost per-Resort-Point for the 2003 calendar year was $5.25. [30] [ 53 ] The Appellant then identified the “ owners of record ” of the Resort Points as at September 30 of a particular year. In October of each year, the Appellant billed each Resort Point Purchaser an amount for the Annual Resort Fee.

For example, if a Resort Point Purchaser held 200 Resort Points as of September 30, 2002, then the Appellant billed that Resort Point Purchaser $1,050 in October 2002 (200 x $5.25) as the Annual Resort Fee for 2003. [31] [ 54 ] The Canadian Developer is not billed the total Annual Resort Fee in October of each year. Instead, the Appellant bills the Canadian Developer monthly for its portion of the Annual Resort Fee. [32] While I did not hear specific evidence with respect to whether the U.S. Developer is billed on an annual or a monthly basis, I have concluded, after reviewing Ms.

Ruff’s calculations, that it was billed on a monthly basis. [ 55 ] She also testified that the Canadian Developer may pay all or a portion of the Annual Resort Fee on behalf of a Canadian Resort Point Purchaser as an incentive for that person to enter into the Canadian Purchase and Membership Agreement or as an incentive for a Resort Point Purchaser to purchase additional Resort Points; the Canadian Developer may also do so when a Canadian Resort Point Purchaser refers a person to the Canadian Developer and that person purchases Resort Points. [33] [ 56 ] Ms.

Ruff testified as well that if the actual expenses exceed the budgeted costs then the excess was added to the budgeted amount in the subsequent year. For example, if the actual expenses incurred in 2003 exceeded the budgeted amounts, then the excess would have been added to the budget for 2004.

If the actual expenses are less than the budgeted amounts, then the subsequent year’s budget is reduced by the amount of the excess. [34] Other supplies of the Vacation Homes [ 57 ] Paragraph 73 of the PASF states the following: From the time the Intrawest Program was established in 1993, the developer [the Canadian Developer] has operated various rental programs outside of the Intrawest Program under which the developer [the Canadian Developer] has generated revenues from renting out vacation homes (using occupancy rights associated with resort points owned by the developer [the Canadian Developer]) [ 58 ] One of these programs was referred to as the Passport Program.

Paragraphs 74 and 76 of the PASF provide the following description of the program: 74. The Passport Membership Program (the “Passport Program”) is a Vacation Home rental program that the developer [the Canadian Developer] created in 2006 to support the developer’s sales and marketing of resort points. . . . 76.

Under the Passport Program, a purchaser buys a number of points that can be redeemed with the developer [the Canadian Developer] (rather than the Club [the Appellant]) to occupy vacation homes during a 12-month period. . . [ 59 ] The PASF states that persons who participated in the Passport Program did not pay any resort fees to either the Canadian Developer or the Appellant. [35] [ 60 ] The Appellant’s financial statements indicate that the Appellant earned revenue in respect of “g etaway fees ” . [36] I did not hear any oral evidence with respect to these fees, nor are they discussed in the PASF.

It appears that these fees are earned when Vacation Homes are rented to Resort Point Purchasers for cash as opposed to Resort Points. The Master Declaration and the Membership Guidelines provide that Vacation Homes that are not reserved by Resort Point Purchasers fourteen days prior to an occupancy date may be rented on a cash basis to Resort Point Purchasers. [37] It is not clear to the Court whether all, or only a portion, of the “ getaway fees ” are paid to the Appellant. As discussed in the next paragraph, revenue earned from the rental of Vacation Homes to the public may be

paid to either the Canadian Developer or the Appellant. [ 61 ] The Appellant’s financial statements refer to “ other revenue ” . I did not receive any evidence with respect to this revenue. I assume that the “ other revenue ” is, in part, the revenue realized from the rental of Vacation Homes to the general public pursuant to

section 5.11 of the Master Declaration, which states, in part, the following: If a Member [a Member of the Appellant] does not reserve occupancy at Resort Accommodation [a Vacation Home] fourteen (14) days prior to an occupancy date, then the Manager [the Canadian Developer [38] ] may offer the Resort Accommodation [a Vacation Home] for rent to the general public and the rental proceeds received after deduction of the Manager’s fee shall be paid at the direction of the Declarant [the Canadian Developer [39] ] either to the Club [the Appellant] or to the Declarant . . . [ 62 ] It is not clear to the Court what portion of these fees was paid to the Canadian Developer and what portion was paid to the Appellant. [ 63 ] There is no evidence before me that the persons who rented Vacation Homes under either of these two programs paid the Annual Resort Fee.

IV. First Issue: Whether the Appellant acquired numerous goods and services as agent for the Members of the Appellant [ 64 ] It is the Appellant’s position that the Annual Resort Fee is not subject to GST since it is a reimbursement of expenses that the Appellant incurred as agent for each of the Canadian Developer, the U.S. Developer, the Canadian Resort Point Purchasers and the American Resort Point Purchasers. [ 65 ] It is the Respondent’s position that the Annual Resort Fee is consideration for a taxable supply of intangible personal property.

Specifically, the Annual Resort Fee is part of the ongoing consideration the Canadian Developer, the U.S. Developer, the Canadian Resort Point Purchasers and the American Resort Point Purchasers must pay in order to maintain their membership in the Appellant. The Law Tax levied under Division II of the GST Act [ 66 ] This appeal is concerned with the GST levied under subsections 165(1) and (2) of Division II of the GST Act . Those subsections read as follows:

(1) Subject to this Part, every recipient of a taxable supply made in Canada shall pay to Her Majesty in right of Canada tax in respect of the supply calculated at the rate of 5% on the value of the consideration for the supply.

(2) Subject to this Part, every recipient of a taxable supply made in a participating province shall pay to Her Majesty in right of Canada, in addition to the tax imposed by subsection (1), tax in respect of the supply calculated at the tax rate for that province on the value of the consideration for the supply. [ 67 ] The 5% rate currently imposed under subsection 165(1) was 7% prior to July 2006 and 6% from July 2006 to the end of 2007. [ 68 ] The effect of subsections (1) and (2) is to levy a single federal value-added tax at two rates: the 5% rate for supplies made in so- called non-participating provinces [40] and a 13%, 14% or 15% rate for supplies made in participating provinces. [ 69 ] The answers to the following questions determine the amount, if any, of Division II tax payable under subsections 165(1) and (2): - Did the supplier make a taxable supply? - What was the amount of the consideration for the supply? - Was the taxable supply made in Canada? [41] - Was the taxable supply made in a participating province? [42] [ 70 ] A taxable supply is defined as a supply made in the course of a commercial activity. [43] The GST Act defines a supply as the provision of property or a service in any manner, including sale, transfer, barter, exchange, licence, rental, lease, gift or disposition. [44] [ 71 ] If I find that the Members of the Appellant paid the Annual Resort Fee to the Appellant as a reimbursement of expenses that the Appellant incurred as agent for the Canadian Developer, the U.S.

Developer and the Resort Point Purchasers, then the Annual Resort Fee is not subject to GST. Where an agent is acting for a principal when acquiring property or a service from a third party supplier, the agent is not making a supply of the property or service to its principal, but is merely acting as a conduit. Principal/Agent Relationship

[ 72 ] The agency argument raised by the Appellant is in respect of costs incurred in Canada, the United States and Mexico. The costs were incurred by the Appellant (a corporation incorporated in the United States), the Canadian Developer or the U.S. Developer. Further, the costs relate to Vacation Homes situated in Canada, the United States and Mexico.

In such a situation, the Court must consider whether the agency law of the United States and Mexico applies to certain of the costs. [ 73 ] It is possible that the law in the United States and/or Mexico relating to the creation of an agency relationship differs from the law in Canada. [ 74 ] In Fernandez v “Mercury Bell” (The) [45] the Federal Court of Appeal held that: It is well known that in countries governed by the English law, a court is not entitled to inquire proprio motu as to the content of the foreign law on the basis of which an action brought before it should be disposed of.

The court will not in principle take judicial notice of foreign law; it will not even consider foreign law as an ordinary fact (which it is not, in any event) about which it may require the parties to adduce satisfactory evidence. If the parties, willfully or inadvertently, fail to bring expert evidence of the foreign law, the court will act as if the foreign law is the same as its own law, it will apply the lex fori . [46] [Emphasis added.] [ 75 ] In short, the consequence of a party failing to bring expert evidence to explain the operation of foreign law is that the concept of lex fori will apply.

The Canadian court will act as if the foreign law is the same as its own law, unless the law is of a local or regulatory nature. [ 76 ] The Appellant did not bring expert witnesses to explain to the Court the operation of the law of agency (or of any law) in the United States or Mexico.

As a result, I will use Canadian law to make my decision on the agency issue and any other legal issue before the Court. [ 77 ] The following definition of agency, by Gerald Fridman, has been quoted and applied in a number of decisions of Canadian courts: Agency is the relationship that exists between two persons when one, called the agent, is considered in law to represent the other, called the principal, in such a way as to be able to affect the principal’s legal position by the making of contracts or the disposition of property. . . . Whether an agency relationship exists is a question of fact.

If there is no evidence proving that one party intended another to act as his or her agent, there is no agency. [47] [ 78 ] Royal Securities Corp v Montreal Trust Co [48] outlined the generally accepted three components of an agency relationship as follows : 1. The consent of both the principal and the agent; 2. Authority given to the agent by the principal allowing the former to affect the latter’s legal position; 3. The principal’s control of the agent’s actions.

Authority of the Appellant to affect a Member of the Appellant’s legal position [ 79 ] Counsel for the Appellant stated at the commencement of her oral argument that “ one of the key issues that needs to be addressed before we can get to characterization of the resort fees [the Annual Resort Fee] is the ownership of the vacation properties [the Vacation Homes]. ” [49] She argued that the beneficial interests in the Vacation Homes are held by the Appellant in trust for the benefit of the Members of the Appellant, namely, the Canadian Developer, the U.S.

Developer, the Canadian Resort Point Purchasers and the American Resort Point Purchasers. Further, she argued that the members hold an “un-deeded, undivided co-ownership ” interest in each Vacation Home. [50] [ 80 ] I agree with the Appellant’s counsel that this is a key issue. One of the components of agency is the authority of the Appellant to affect the legal rights of the Members of the Appellant.

If the Members of the Appellant are not obligated to pay the expenses required to maintain, repair, improve and operate the Vacation Homes (the Vacation Home Operating Costs ), or to incur other expenses with regard to the Vacation Homes, then there are no legal rights that the Appellant can affect on behalf of the members in respect of such expenses.

In such a situation, an agency relationship cannot, as a question of fact, exist. [ 81 ] It is the Respondent’s position that the Appellant does not hold the beneficial interest in trust for the members of the Appellant. [ 82 ] When assessing the Appellant, the Minister made the following assumptions, - Under the Intrawest Program, the Canadian Developer builds Vacation Homes situated in Canada and transfers beneficial ownership of those properties to the Appellant in exchange for the rights to occupy the resort accommodations beneficially owned by the Appellant. - The Appellant beneficially owns resort accommodations in British Columbia, Ontario, Quebec, California, Florida, Hawaii and Mexico. - The Appellant acquires beneficial ownership of the real properties acquired by the Canadian Developer and the U.S.

Developer

in exchange for Resort Points. - The Resort Point Purchasers do not hold fee-simple title to their interest in the Vacation Homes, but only hold points. [ 83 ] In my view, these assumptions mean that the Minister assumed, when assessing the Appellant, that the Appellant held the beneficial interest in the Vacation Homes, subject to the occupancy rights granted to the Canadian Developer and the U.S.

Developer. [ 84 ] The onus is on the Appellant to establish, on a prima facie basis, that someone transferred beneficial interests in the Vacation Homes, and particularly the risk with respect to the homes, to the Canadian Developer, the U.S.

Developer, the Canadian Resort Point Purchasers and the American Resort Point Purchasers. [ 85 ] In Velcro Canada Inc v The Queen, [51] Associate Chief Justice Rossiter (as he then was), citing Associate Chief Justice Rip (as he then was) in Prévost Car Inc. v The Queen , [52] stated that there are four elements in considering the attribution of beneficial ownership: possession, use, risk and control.

Associate Chief Rossiter stated the following: “ In looking at the beneficial ownership issue one must apply the test as set out by Chief Justice Rip, and in doing so, one must look to the meaning of individual words, that is, ‘possession’, ‘use’, ‘risk’ and ‘control’. These words have ordinary meanings. ” [53] Transfer of Canadian Vacation Homes from the Canadian Developer to the Appellant [ 86 ] The evidence before me is that the Canadian Developer was the first of the relevant persons to hold legal and beneficial ownership in any of the Canadian Vacation Homes.

The Canadian Developer transferred its legal and beneficial ownership in each of the Canadian Vacation Homes to the Appellant. [54] [ 87 ] Simultaneously with its acquisition of a Canadian Vacation Home, the Appellant transferred the legal title in the Canadian Vacation Home to the Canadian Bare Trustee.

The Canadian Bare Trust Agreement clearly states that, at the time the Appellant acquired the Canadian Vacation Home, the Appellant held the beneficial ownership in the Canadian Vacation Home. [55] [ 88 ] As consideration for the Canadian Vacation Home, the Appellant then transferred to the Canadian Developer the occupancy rights to the Canadian Vacation Home in perpetuity. [56] [ 89 ] In

summary, when the Appellant, the Canadian Developer and the Canadian Bare Trustee completed the transactions, the Canadian Bare Trustee held legal title in the Canadian Vacation Home in trust for the Appellant, and the Canadian Developer held the right to occupy the Canadian Vacation Home. [ 90 ] One must apply the test set out by then Associate Chief Justice Rip to determine, who, at that point in time, held the beneficial ownership in the Vacation Homes. [ 91 ] The first element I will consider is “use” .

Black’s Law Dictionary defines the noun “use” , in part, as “ the application or employment of something; esp., a long-continued possession and employment of a thing for the purpose for which it is adapted. . . ” [57] The Canadian Oxford Dictionary defines the verb “use” as meaning, among other things, “ to employ or avail oneself of (something) regularly ” [58] [ 92 ] In my view, if the Canadian Developer held the right to occupy the Canadian Vacation Homes, then it held the right to employ the homes and thus the right to use them. [ 93 ] The second element to consider is “ possession ” .

Black’s Law Dictionary defines “ possession ” as: 1. The fact of having or holding property in one’s power; the exercise of dominion over property. 2. The right under which one may exercise control over something to the exclusion of all others . . . [ 94 ] Without a copy of the Canadian Vacation Home Transfer Agreement or viva voce evidence from a witness, it is not clear to me what power, if any, the Appellant retained over the Canadian Vacation Homes after it transferred the occupancy rights to the Canadian Developer.

The Canadian Developer certainly held significant control over the Canadian Vacation Homes since it held the right to use the homes. However, under the Intrawest Program, particularly the Master Declaration, the Appellant also exercised significant control over the Vacation Homes.

It is not clear to me whether the Appellant retained this control pursuant to the Canadian Vacation Home Transfer Agreement or whether it acquired the control after it transferred the use of the properties to the Canadian Developer. [ 95 ] It is impossible for me to make a definitive finding with the little evidence before me; the Canadian Developer probably held possession rights in the Canadian Vacation Homes subject to any residual interest that the Appellant may have held in the homes. [ 96 ] The third element to consider is “risk” .

This is the key element for the purposes of the Appellant’s argument. [ 97 ] In Black’s Law Dictionary “risk” signifies “ the chance of injury, damage, or loss. . . liability for injury, damage, or loss if it occurs ” . The Canadian Oxford Dictionary refers to “ a chance or possibility of danger, loss, injury, or other adverse consequences ”. [ 98 ] With respect to the Canadian Vacation Homes, risk refers to the risk of damage to the property through fire, misconduct of the users or normal wear and tear.

It includes the liability to incur expenses in respect of the operation, repair and maintenance of the properties in order to ensure that they are suitable for occupancy under the Intrawest Program (i.e. the Vacation Home Operating Costs). [ 99 ] While I have evidence that the Appellant transferred use and possession [59] to the Canadian Developer, there is no evidence before me that the Appellant transferred any risk with respect to the Canadian Vacation Homes to the Canadian Developer. [ 100 ] If the Appellant did transfer some or all of the risk relating to the Canadian Vacation Homes to the Canadian Developer, then it would have done so pursuant to the Canadian Vacation Home Transfer Agreement.

The Appellant did not provide the Court with a copy

of this agreement nor did it produce a witness from either the Appellant or the Canadian Developer who could have testified concerning the contents of the agreement, or provided viva voce evidence of a transfer of the risk. [ 101 ] As a result, since I have no evidence that the Appellant transferred any portion of the risk, I am left with the conclusion that the Appellant retained the risk. This is consistent with the testimony of Ms.

Ruff that the Appellant, not the Canadian Developer, pays the expenses for repairing, maintaining and operating the Canadian Vacation Homes. [ 102 ] Further, I have drawn an adverse inference from the Appellant’s failure to provide such a key document as the Canadian Vacation Home Transfer Agreement or to produce a witness from the Appellant or the Canadian Developer to speak to the terms of the transfer. [ 103 ] The impact of not calling relevant witnesses was discussed by the Supreme Court of Canada in Lévesque v Comeau et al . [60] The Court held that a party’s failure to call a witness meant that the “ Court must presume that such evidence would adversely affect her case. ” [61] I have drawn such a conclusion in this appeal. [ 104 ] The last element to consider is “control” .

Black’s Law Dictionary defines the verb “control” as meaning “ to exercise power or influence over ” . The Canadian Oxford Dictionary defines it as having the sense of “ dominate or have command of. ” [ 105 ] Since the Appellant did not provide the relevant agreements or relevant viva voce evidence, I simply do not know the extent to which the Appellant retained control over the Canadian Vacation Homes and the extent to which it transferred control to the Canadian Developer.

However, the evidence before me is that the Appellant and the Canadian Developer shared control of the Canadian Vacation Homes. [ 106 ] Clearly, the Canadian Developer, as the person entitled to occupy the Canadian Vacation Homes, exercised significant control over the Vacation Homes. However, it appears from the Master Declaration that the Appellant, when managing the Intrawest Program, also exercised some control over the homes. [ 107 ] My conclusion that the two shared control is also supported by

section 5.11 of the Master Declaration, [62] which provides that the Canadian Developer and the Appellant share the revenue realized when a Vacation Home is rented to the general public. That

section states that the Canadian Developer determines how such revenue is shared by the two parties. [ 108 ] To summarize, I have concluded that, once the transfer of a Vacation Home from the Canadian Developer to the Appellant was completed, both the Appellant and the Canadian Developer held beneficial interests in the Canadian Vacation Home. More importantly for the purposes of this appeal, the risk of damage to the property through fire, misconduct of the users or normal wear and tear rested with the Appellant.

This included the liability to repair and maintain the Canadian Vacation Homes in order to ensure that they were suitable for occupancy under the Intrawest Program. [ 109 ] Further, I was not provided with any evidence of a subsequent transaction that resulted in the Appellant transferring beneficial interests, including the risk with regard to repairing and maintaining the Canadian Vacation Homes, to the Canadian Developer or to the U.S. Developer.

Transfer of U.S./Mexico Vacation Homes to the Appellant [ 110 ] I have, for the same reasons, concluded that, once the transfer of a U.S./Mexico Vacation Home from the U.S. Developer to the Appellant was completed, both the Appellant and the U.S. Developer held beneficial interests in the U.S./Mexico Vacation Home. The Appellant bore the risk relating to the repair and maintenance of the U.S./Mexico Vacation Homes. [ 111 ] There is no evidence before me of any subsequent transfer by the Appellant to the U.S.

Developer, or the Canadian Developer of beneficial interests in the U.S./Mexico Vacation Homes, including the risk relating to the repair and maintenance of the homes. Did either the Canadian Developer or the U.S. Developer transfer beneficial interests in the Vacation Homes to the Resort Point Purchasers? [ 112 ] Counsel for the Appellant argued that the “members” acquire their interest in the Vacation Homes by purchasing Resort Points from the “ developer ” . [63] When referring to “members” she was referring, I assume, to the Canadian Resort Point Purchasers and the American Resort Point Purchasers.

When referring to “ developer ” , she was referring, I assume, to the Canadian Developer and the U.S.

Developer. [ 113 ] I will first deal with the sale of Resort Points by the Canadian Developer to the Canadian Resort Point Purchaser. [ 114 ] Pursuant to sections 2 and 4 of the Canadian Purchase and Membership Agreement, [64] the Canadian Developer sold Resort Points and memberships in the Appellant to the Canadian Resort Point Purchasers. [ 115 ] The sale by the Canadian Developer of Resort Points and memberships in the Appellant appears to me to be the granting of a contractual right to occupy the Vacation Homes pursuant to the rules set out in the Master Declaration and the Membership Guidelines.

As noted in paragraph 21(

a) of the PASF, the principal rights that a Member of the Appellant has in connection with the Intrawest Program are the following: (

a) the right to use resort points held by the member to reserve the use of the vacation homes in accordance with the Guidelines [the Membership Guidelines] as established by the developer [the Canadian Developer]. [ 116 ] This is a contractual right. The fact that a Canadian Resort Point Purchaser has the contractual right to use Resort Points in such a

way does not grant the Canadian Resort Point Purchaser a beneficial interest in a specific Vacation Home. Rather, it provides the Canadian Resort Point Purchaser with the right to occupy an individual unit in accordance with the rules established under the Intrawest Program. [ 117 ] For example,

section 10.15 of the Master Declaration states that if a Resort Point Purchaser is in default on any assessment levied upon him/her by the board of directors of the Appellant, then the Resort Point Purchaser is not entitled to occupy any of the Canadian or U.S./Mexico Vacation Homes until the default is corrected. In other words, the Resort Point Purchaser’s (including a Canadian Resort Point Purchaser’

s) contractual right to occupy one of the Vacation Homes is suspended. [ 118 ] Further, since the Canadian Developer was not at risk with regard to the Canadian Vacation Homes, it could not, in any scenario, transfer the obligation to repair and maintain the Canadian Vacation Homes to the Canadian Resort Point Purchasers. [ 119 ] Also, there is no evidence before me that the Canadian Developer held any interests in the U.S./Mexico Vacation Homes. Specifically there is no evidence before me that either the Appellant or the U.S.

Developer transferred any beneficial interests in the U.S./Mexico Vacation Homes to the Canadian Developer. As a result, the Canadian Developer could not have transferred beneficial interests in the U.S./Mexico Vacation Homes to the Canadian Resort Point Purchasers. [ 120 ] There is no evidence before me of any transactions between the U.S. Developer and the Canadian Resort Point Purchasers. [ 121 ] In

summary, there is no evidence before me of any transaction that resulted in either the Canadian Developer or the U.S. Developer transferring beneficial ownership of the Canadian Vacation Homes or the U.S./Mexico Vacation Homes to the Canadian Resort Point Purchasers. Specifically, there is no evidence of either corporation transferring to the Canadian Resort Point Purchasers a beneficial interest that would result in the purchasers being responsible for the repair and maintenance of the Canadian Vacation Homes or the U.S./Mexico Vacation Homes. [ 122 ] I will now consider the sale of Resort Points by the U.S.

Developer. [ 123 ] I have very little evidence with respect to transactions between the U.S. Developer, the Appellant and the American Resort Point Purchasers. The only evidence I have is the statements in the PASF that the American Resort Point Purchasers purchased Resort Points from the U.S. Developer.

I was not provided with a copy of the agreement pursuant to which the American Resort Point Purchasers purchased the points. [ 124 ] In short, there is no evidence that would allow me to conclude, even on a prima facie basis, that an American Resort Point Purchaser acquired a beneficial interest in either a U.S./Mexico Vacation Home or a Canadian Vacation Home from either the U.S. Developer or the Canadian Developer.

Did the Appellant transfer beneficial interests in the Vacation Homes directly to the Resort Point Purchasers? [ 125 ] There is no evidence before me of the supply of any property by the Appellant to the Canadian Resort Point Purchasers.

In fact, the only transaction that I am aware of between the Appellant and the Canadian Resort Point Purchasers is the one resulting in the payment of the Annual Resort Fee. [ 126 ] The Canadian Resort Point Purchasers did acquire memberships in the Appellant; however, they acquired these memberships from the Canadian Developer at the time they entered into the Canadian Purchase and Membership Agreement.

I assume that the Canadian Developer acquired the memberships from the Appellant. [ 127 ] Similarly, I received no evidence with respect to any transactions between the Appellant and the American Resort Point Purchasers. [ 128 ] In

summary, there is no evidence before me that either the Canadian Resort Point Purchasers or the American Resort Point Purchasers held a beneficial interest in the Vacation Homes. Did the Appellant transfer beneficial interests in the Vacation Homes to a trust for the benefit of the Members? [ 129 ] The Appellant’s counsel also argued that the Appellant held beneficial interests in the Vacation Homes in trust for the Members of the Appellant. [ 130 ] The Appellant did not provide the Court with written or oral evidence with respect to the terms of such a trust.

Specifically, the Appellant did not provide the Court with a transfer agreement, or oral evidence of such an agreement, pursuant to which the Appellant transferred beneficial interests in either the Canadian Vacation Homes or the U.S./Mexico Vacation Homes to a trust under which the members were beneficiaries. In addition, the Appellant did not provide the Court with a trust agreement or with oral evidence with respect to the terms of such a trust agreement. [ 131 ] I have drawn an adverse inference from the failure of the Appellant to produce such evidence.

The existence of the trust was a key part of its argument. It certainly realized the importance of providing a copy of a trust agreement with respect to a trust that it alleged existed, since it provided the Court with a copy of the Canadian Bare Trust Agreement. In my view, if documents that were key to the Appellant’s argument, such as an agreement transferring its beneficial interest to a trust or a trust agreement in respect of such trust, did exist then the Appellant would have provided such documents to the Court.

The fact that such documents were not provided seriously damaged the credibility of the Appellant’s argument.

[ 132 ] The only evidence before me that such a trust existed is the testimony of Mr. Thompson and

section 4.4 of the Master Declaration. [ 133 ] Although Mr. Thompson referred to the existence of a trust, he did not take me to any trust agreements or provide any oral evidence with respect to the terms of such a trust. [ 134 ]

Section 4.4 of the Master Declaration states the following: . . . The Club will hold title to all Resort Accommodation registered in its name, and to all beneficial interests in the Trust [the Canadian and U.S. bare trusts] or other similar holding vehicle to which title to Resort Accommodation may be transferred, in trust, for the benefit of the Members and the value of each Member’s beneficial interest in the Resort Accommodation shall be paid out and distributed to each Member of the Club in accordance with

Article X of the Bylaws of the Club . . . [65] [ 135 ] In my view, this clause does not create a trust. It merely evidences that the Appellant and the Canadian Developer (the parties to the Master Declaration) have agreed that the Appellant will create a trust to hold its beneficial interests in the Vacation Homes. There is no evidence before me that the Appellant created such a trust. [ 136 ] Further, the clause is ambiguous since it states that “ the value of each Member’s beneficial interest in the Resort Accommodation shall be paid out and distributed to each Member of the Club in accordance with

Article X of the Bylaws of the Club. ”

Article 10.2 of the By-laws states the following: On a winding-up and dissolution of the Club [the Appellant], the Board of Directors or the Trustee shall liquidate all of the assets of the Club [the Appellant] and convert them to cash and the balance, after making a provision for the payment of all debts, taxes, (if any), and expenses associated with the winding-up and dissolution shall be distributed to the Members of the Club . . . [Emphasis added.] [ 137 ] This clause appears to state that the assets, including the Vacation Homes, are the assets of the Appellant and are only distributed to its members on a winding up and dissolution of the Appellant.

There is no reference in the By-laws to the Appellant holding any of its assets in trust for its members. Further, sections 10.1 and 10.2 of the By-laws, which constitute all of

Article X, contemplate a situation where the Appellant holds its assets for its own account, not in trust for its members. [ 138 ] For the foregoing reasons, I have concluded that the Appellant, not a trust, held the beneficial interests in the Vacation Homes. [ 139 ] Even if I were to find that the Appellant transferred its beneficial interests in the Vacation Homes to a trust, such a factual finding would not support the Appellant’s argument that Members of the Appellant held beneficial interests in the Vacation Homes. A “person” is defined in subsection 123(1) of the GST Act to include a trust.

Further, the effect of this definition and the provisions of sections 267.1 to 269 is that, if the Appellant did transfer its beneficial interests in the Vacation Homes to a trust for the benefit of its members, then the Trust, and not the trustee or the beneficiaries, held the beneficial interests. Conclusion [ 140 ] On the evidence before me, I have concluded that the Appellant held the beneficial interests in the Vacation Homes, subject to occupancy rights (and any incidental rights and interests) held by the Canadian Developer and the U.S. Developer.

The beneficial interests held by the Appellant included the risk with respect to the Vacation Homes, including the obligation to incur the Vacation Home Operating Costs. [ 141 ] There is no evidence before me of the Appellant transferring to the Canadian Developer, the U.S.

Developer, the Canadian Resort Point Purchasers or the American Resort Point Purchasers, beneficial interests in the Vacation Homes that would result in any of them being responsible for the operation, repair and maintenance of the Vacation Homes or being liable to incur any expenses with respect to the Vacation Homes. [ 142 ] As a result, since there were no legal rights that the Appellant could affect on behalf of its members (the Canadian Developer, the U.S.

Developer, the Canadian Resort Point Purchasers and the American Resort Point Purchasers), an agency relationship did not exist between the Appellant and each of these persons in respect of such expenses. Consent of both principal and agent [ 143 ] Another component of an agency relationship is the consent of both the principal and the agent. [ 144 ] In assessing the Appellant, the Minister assumed that “ Members do not consent to the appellant acting as their agent ”.

For the following reasons, I agree with the Minister’s assumption. [ 145 ] I was not provided with any agreement that, in my view, constitutes between the Appellant and the Canadian Resort Point Purchasers, the American Resort Point Purchasers, the Canadian Developer or the U.S.

Developer, an agency agreement pursuant to which the Appellant agreed to act as agent for any of these parties with respect to the Vacation Home Operating Costs. [ 146 ] I was provided with the Management Agreement between the Appellant and the Canadian Developer pursuant to which the Appellant, among other things, appointed the Canadian Developer as its agent for specific functions, such as employing persons to maintain and operate the Vacation Homes, including maids and front desk personnel.

The agreement also states that the Canadian Developer will, as agent for the Appellant, oversee and supervise all employees of the Appellant. [66]

[ 147 ] The agreement contains numerous clauses that one would expect in an agency agreement, such as a standard of care clause, an indemnification clause, a term clause and a discretionary authority clause. [67] [ 148 ] I was not provided with a similar agreement whereby the Canadian Resort Point Purchasers, the American Resort Point Purchasers, the Canadian Developer or the U.S. Developer appointed the Appellant as their agent with respect to the Vacation Home Operating Costs. I have drawn a negative inference from the failure of the Appellant to provide the Court with such an agreement.

The Appellant was certainly aware of the importance of any such agreement, since it provided the Court with the Management Agreement. [ 149 ] I have a very difficult time accepting that the Members of the Appellant, particularly the Canadian Resort Point Purchasers and the American Resort Point Purchasers, would have appointed the Appellant as their agent without entering into an agreement with the Appellant that specified the actual expenses the Appellant could incur as their agent, the standard of care the Appellant was expected to meet and the terms of any indemnification. [ 150 ] Paragraph 14 of the PASF states that the Intrawest Program is governed by the following documents: the Master Declaration, the Incorporation Documents, the By-laws, the Canadian Bare Trust Agreement, the U.S.

Bare Trust Agreement, the Membership Guidelines, the Purchase and Membership Agreement and the Membership Certificate. [ 151 ] There is no mention of the Appellant acting as agent for its members in any of these documents except for

section 7 of the Canadian Purchase and Membership Agreement and sections 9.1 and 9.3 of the Master Declaration. [ 152 ] The Appellant appears to be arguing that the Canadian Purchase and Membership Agreement and the Master Declaration constitute agency agreements. I do not agree. [ 153 ] With respect to the Purchase and Membership Agreement, the only reference to agent is in

section 7 entitled “ Charges and Assessments ”, which states that “ [t]he Purchaser understands and agrees that the Club will incur Membership expenses as the agent for all Members in accordance with their proportionate share of the Resort Points issued by the Club . . . ” [68] [ 154 ] Mr. Thompson testified that he drafted this clause on behalf of the Canadian Developer.

He noted that the reference to the Appellant incurring the expenses as agent for its members did not exist when he first drafted the Canadian Purchase and Membership Agreement; it was added three years after the creation of the Intrawest Program. [69] The only evidence I received with respect to why the reference to agent was added was Mr.

Thompson’s testimony that the Canadian Developer added the words three years after the creation of the Intrawest Program, on the advice of an accountant. [ 155 ] The effect of the Canadian Developer adding such words three years after the start of the Intrawest Program is that some Canadian Resort Point Purchasers purchased Resort Points and memberships in the Appellant pursuant to an agreement that did not refer to the Appellant acting as their agent. [ 156 ] Regardless, the Appellant is not a party to the Purchase and Membership Agreement.

That agreement is between a Canadian Resort Point Purchaser and the Canadian Developer. I do not see how it could constitute an agency agreement between the Canadian Resort Point Purchaser and the Appellant if the Appellant is not a party to the agreement. [ 157 ] While the agreement indicates that the Appellant will be appointed to act as the agent of the Canadian Resort Point Purchasers, I was not provided with an agency agreement that effects this intention. [ 158 ] The second agreement is the Master Declaration.

This appears to me to be an agreement between the Canadian Developer and the Appellant whereby they agree to establish and operate the Intrawest Program. In the agreement, the two parties agree on how they will operate the program. [ 159 ] It is not an agency agreement. [ 160 ] Sections 9.1 and 9.3, which contain the only references to agency, state the following: 9.1 Administration of the Resort Accommodations .

Subject to any Project Instruments and the Club Instruments, responsibility for the maintenance, repair, replacement, restoration, improvement, operation, and administration of the Resort Accommodations shall be vested in the Club. The Club shall act as the agent of all of the Members in collecting Assessments and in paying taxes, utility costs, and other Membership Costs. The Club, through its Board of Directors, Officers, the Manager, and other duly authorized agent(

s) may exercise any and all rights and powers granted to it by law or by the Club Instruments, as amended or supplemented from time to time. Pursuant to the provisions of the Certificate of Incorporation, the exclusive power to promulgate and amend the Guidelines shall be vested in the Declarant as long as the Declarant is retained as Manager and the Board shall have no power with respect to such Guidelines except as to the enforcement thereof. . . . 9.3 Resort Accommodations and Equipment .

Subject to any Project Instruments, exclusive control and responsibility over the maintenance, repair, modification, and alteration of all Resort Accommodations and the Equipment therein is vested in the Club, as agents for the Members. The Club shall at all times maintain the Resort Accommodations in good condition and repair. In the event of any disruption in service, the Club shall immediately make such repairs as may be necessary to restore such services.

If the Declarant believes in good faith that the Club cannot or will not immediately make such repairs, the Declarant may, but shall not be obligated to, immediately arrange for and make such repairs in order to restore service, and the Club shall be liable to the Declarant for the cost of such repairs. The Club shall have complete discretion to determine the interior color scheme, decor and furnishings of all Resort Accommodations, as well as the timing, extent, and nature of all redecoration, repairs, and replacements thereof.

No Member shall make any repairs, modifications, alterations, additions, redecoration, or replacements to any Resort

Accommodation or to any Equipment therein, without the prior written approval of the Club. Each Member, during his or her reserved or scheduled Use Period(s), shall keep the interior of his or her Assigned Resort Accommodation, including, without limitation, the interior walls, windows, glass, ceilings, floors, fixtures, and appurtenances thereto, and all Equipment contained therein, in a clean, sanitary, and attractive condition, and shall be personally liable for any damage or destruction thereto caused by such Member, members of his or her family, his or her guests, tenants, invitees, or licensees as provided in

Section 5.3 hereof. [ 161 ] Mr. Thompson testified that the reference to agent in sections 9.1 and 9.3 was not contained in the original Master Declaration; rather, as with the Canadian Purchase and Membership Agreement, the words were added three years after the Master Declaration was first executed, at the direction of an accountant. [70] [ 162 ] This may help explain the inconsistencies in

Article 9 of the Master Declaration. In my view, the article, when read as a whole, states that it is the Appellant that incurs, on its own account, the Vacation Home Operating Costs. For example, the first sentence in

section 9.1 states that the responsibility for the maintenance, repair, replacement, restoration, improvement, operation and administration of the Vacation Homes is vested in the Appellant. Further, the first sentence of the second paragraph of

section 9.3 states that no Member shall make or do any repairs, modifications, alterations, additions, redecoration or replacements to or in any Vacation Home without the prior written approval of the Appellant.

These two clauses appear to me to state that it is the Appellant, not the Members, that is responsible for the operation and upkeep of the Vacation Homes. [ 163 ] This is consistent with my previous factual finding that the beneficial interests in the Vacation Homes held by the Appellant included the risk with respect to the homes, including the expenses incurred in respect of their operation, repair and maintenance. [ 164 ] Obviously, such a factual finding is inconsistent with the references in the second sentence of

section 9.1 and the first sentence in

section 9.3 to the Appellant incurring the Vacation Home Operating costs as agent for its members. It is not clear to me why the agency words were added three years later to an agreement that contemplates the Appellant incurring the expenses on its own account. I do not believe that this reflected the actual relationship between the Appellant and its members. [ 165 ] The Purchase and Membership Agreement and the Master Declaration cannot constitute an agency agreement between the American Resort Point Purchasers and the Appellant or between the U.S.

Developer and the Appellant, since the American Resort Point Purchasers and the U.S. Developer are not parties to either agreement. Further, I was not provided with any written agreements or viva voce evidence with respect to any agreements (including an agency agreement) entered into by either the American Resort Point Purchasers or the U.S.

Developer in respect of the Intrawest Program. [ 166 ] In my view, in a situation where the Court has not been provided with an agency agreement, the Court must look at the conduct of the parties to determine whether an agency relationship has come into existence. [71] [ 167 ] The Appellant did not call any Canadian Resort Point Purchasers, American Resort Point Purchasers or employees, officers or directors of the Appellant to testify before the Court with respect to the purported agency relationship. [72] Counsel for the Respondent argued that I should draw an adverse inference from the failure of the Appellant to call such a witness.

I agree. [ 168 ] Such a witness would have provided the Court with definitive evidence with respect to whether a Canadian Resort Point Purchaser or an American Resort Point Purchaser consented to the Appellant acting as that purchaser’s agent. A witness for the Appellant could have also addressed the purported agency relationship between the Appellant and the Canadian Developer and between the Appellant and the U.S. Developer. [ 169 ] The Respondent did call two Canadian Resort Point Purchasers, Mr. Abraham and Ms. Ewing. Ms. Ewing did not address the agency issue. [ 170 ] However, Mr.

Abraham testified that he entered into the Canadian Purchase and Membership Agreement in 1998. He testified that the only documents he received when he purchased the Resort Points were the Canadian Purchase and Membership Agreement and a Membership Certificate.

He did not receive a copy of the Master Declaration, the Canadian Bare Trust Agreement, the Management Agreement, the By-laws, the Incorporation Documents or any other documents. [73] [ 171 ] More importantly, he testified that he did not know that the Appellant was holding itself out as his agent. [74] This is the only direct evidence I have relating to the consent issue. [ 172 ] In

summary, the only direct evidence I have before me with respect to the conduct of the members supports the Minister’s assumption that the Members of the Appellant did not consent to the Appellant acting as their agent. [ 173 ] There is other evidence before me that supports a finding that the conduct of the parties does not support a finding of agency. This includes the following: The items that comprise the Annual Resort Fee [ 174 ] The Appellant calculated the Annual Resort Fee in part on the basis of expenses other than Vacation Home Operating Costs.

In the first instance, it included internal costs of the Appellant, such as the cost of its annual general meeting, the cost of its auditor, income tax and legal costs of the Appellant. As a question of fact, these were costs of the Appellant, not its members (i.e. the Canadian Developer, the U.S. Developer and the Resort Point Purchasers). In other words, the Appellant incurred these costs on its own account, not as agent for its members. [ 175 ] A portion of the Annual Resort Fee relates to a reserve fund maintained by the Appellant.

This portion of the Annual Resort Fee represents a contingency fee for future unexpected costs. It does not represent an expense incurred by the Appellant as agent of its

Members. Wording in the By-laws and Master Declaration [ 176 ]

Section 7.2 of the By-laws provides that the Members of the Appellant shall pay the Assessments (the Annual Resort Fee) to the Appellant in accordance with the terms and provisions of the Master Declaration. There is no obligation in the By-laws for the members to personally incur the Vacation Home Operating Costs or any other expenses related to the Vacation Homes. [ 177 ] In fact,

section 4.18 of the By-laws states that the board of directors of the Appellant has the duty to maintain, repair, restore, improve and operate the Vacation Homes. [ 178 ]

Section 10.1 of the Master Declaration states the following: 10.1 Creation of Lien and Personal Obligation for Assessments . . . . each Member by acceptance of a Membership Certificate . . . is deemed to covenant and agree to pay to the Club an annual Resort Fee, Special Assessments for capital improvements or other extraordinary expenses or costs, and Personal Charges, all such Assessments to be established and collected as provided in this

Article 10 and as hereinafter provided. . . [ 179 ] This

section obligates a member to pay the Annual Resort Fee. In my view, this is distinct from being personally liable for the Vacation Home Operating Costs. [ 180 ] Further, pursuant to

section 10.4 of the Master Declaration, while the amount of the Annual Resort Fee is based on estimated costs, the actual amount of the fee is at the sole discretion of the Appellant’s board and may be adjusted, such adjustment being “ based on the additional expenses incurred by the Club [the Appellant]. ” [75]

Section 10.5 of the Master Declaration provides that the Annual Resort Fee may not exceed a specific amount. [ 181 ] These clauses, in my view, are predicated on the assumption that the costs are incurred by the Appellant on its own account and not as agent for its members. Ability of the Canadian Developer to avoid paying the Annual Resort Fee [ 182 ] Ms. Ruff acknowledged that the Canadian Developer has the option of not paying the Annual Resort Fee if it elects to subsidize the financial operations of the Appellant. This is provided for in sections 10.7 and 1.8 of the Master Declaration.

Section 10.7 states the following: “ In lieu of the payment of an annual Resort Fee, the Declarant [the Canadian Developer] may elect to subsidize the financial operations of the Club in the event all Assessments and every other revenue source (income) received by the Club fails [sic] to equal or exceed the actual expenses incurred during the fiscal year. . . ”

Section 1.8 of the Master Declaration defines “ Assessment ” as including the Annual Resort Fees. [76] [ 183 ]

Section 10.7 does not contemplate a situation where the Appellant is incurring costs as the Canadian Developer’s agent. Rather, it is based upon the assumption that the Appellant incurs costs on its own account. The Canadian Developer is agreeing to provide financial assistance if such costs exceed the Appellant’s annual revenue. Control [ 184 ] The third factor to consider when determining the existence of an agency relationship is the principal’s control of the agent’s (Appellant’

s) action. [ 185 ] The Appellant is a non-share corporation. In similar fashion to corporations that issue shares, the Appellant is controlled by its board of directors, who are elected by the Members of the Appellant. As a result, th

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