Case information

None.

Case summaries are prepared by the Office of the Registrar of the Supreme Court of Canada (Law Branch). Please note that summaries are not provided to the Judges of the Court. They are placed on the Court file and website for information purposes only.

Contracts — Interpretation — Legislation — Taxation legislation — Provincial sales tax — Provincial sales tax payable by applicant assessed as the contract price paid for electricity under one agreement plus the amount payable as rent under agreements granting possessory rights to hydroelectric facilities — Whether the appellate court decision is contrary to Shell Canada Ltd. v. Canada, [1999] 3 S.C.R. 622 — Whether the appellate court can ignore the bona fide legal effect of the possessory interest agreement, thereby conflating the rent paid under that agreement with the contract price of electricity paid under the power purchase agreement.

The applicants challenged assessments of provincial sales tax held payable by Catalyst Paper Corporation (“Catalyst”) on the “purchase price” for electricity it requires to operate its pulp mill. Hydroelectric facilities owned by Catalyst were sold to the applicant (“PREI”), a related company, and a 49% interest in PREI was sold to a third party. In structuring the deal to ensure its continued qualification for the favourable “commercial” water rental rate under regulations, Catalyst entered into six possessory interest agreements with PREI requiring it to pay rent to PREI. Catalyst also entered into a power purchase agreement to buy electricity from PREI for a contract price calculated as the product of an energy rate and delivered energy, minus the rent paid under the possessory interest agreements.

From February 1, 2002 to August 31, 2005, Catalyst paid PST on the contract price for electricity but not on the amount paid as rent. The Commissioner of Social Service Tax assessed Catalyst for the PST payable in respect of the amount of rent, on the basis that it was additional monetary consideration for electricity. After unsuccessfully appealing to the Minister of Small Business and Revenue, Catalyst and PREI brought petitions appealing his decision. The Supreme Court of British Columbia allowed the appeals and set aside the assessments. The Court of Appeal for British Columbia allowed the appeals, set aside the orders of the chambers judge and dismissed the applicants’ petitions.