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Case Name:

Kordish v. Innotech Multimedia Corp.

Between
Paul Kordish and Kortech Inc., plaintiffs and defendants to
counterclaim, and
Innotech Multimedia Corporation, defendant and plaintiff by
counterclaim

[1999] O.J. No. 1734
Court File No. 97-CU-117503

Ontario Superior Court of Justice
C. Campbell J.

May 13, 1999.
(4 pp.)

Counsel:
Andrew C. Lewis, for the plaintiff.
H.A. Fancy, for the defendants.

  1. C. CAMPBELL J.: Following judgment in this matter I have received both written and oral submissions from counsel on the issue of GST claimed by the plaintiff on the damages awarded.


  2. Counsel for the plaintiff urges that his client may be responsible for GST pursuant to s. 182(1) of the Excise Tax Act R.S.C.


  3. Mr. Lewis submits that the damages awarded are a deemed taxable supply based on the following conditions which he urges are satisfied:

    1. there must be a breach, modification, or termination of an agreement;


    2. the breach, modification, or termination of the agreement must have occurred after 1990;


    3. the subject agreement must have been for the making of a taxable supply (other than a zero-rated supply);


    4. there must be a payment as a result of the breach, modification, or termination;


    5. the recipient of the payment must be a "registrant" as defined in subsection 123(1) of the Act;


    6. the recipient of the payment must be the person who originally supplied or agreed to supply goods or services; and


    7. the payment must not be consideration for the taxable supply contemplated by the subject agreement.


  4. As a result it is suggested the plaintiff will, unless specifically entitled to recover GST, have to deduct that amount from the award and remit it to Revenue Canada.


  5. Counsel for the defendant objects to consideration of GST at this stage since it was not specifically pleaded and no evidence led on the issue at trial. In particular he notes that there was no evidence as to whether or not the plaintiff Kortech Inc. was a "registrant" as defined in the Statute. This becomes significant since the commentary to s. 182(1) in the material provided since in his submission if both the plaintiff and defendants are registrants section 182(1) will not apply.


  6. In addition he urges referring to the decision of R.M.S. Enviro Solv. Inc. v. Cecil Shares Ltd. [1997] O.J. No. 3740 in which Young Deputy held that pursuant to s. 165 no GST would be payable as it otherwise would be since the defendant was not a recipient of a taxable supply. It is suggested that since Innotech was liable for damages in lieu of appropriate notice it did not receive a taxable supply in consideration therefore this is not GST payable. It is also submitted that the plaintiff would only be liable for GST if it could be established that GST was included in the award which it was not.


  7. I have concluded that it is not appropriate that the plaintiff recover an additional amount for GST on the damages previously awarded. I make this finding for two reasons.

    1. I am concerned that there was not an evidentiary basis put forward at trial by either party on their GST status;


    2. I am also far from satisfied that an award of damages in lieu of notice of a contract for services that is essentially a contract for employment that GST would in any event be payable or payable by the plaintiff.

  8. I therefore conclude that no additional sum should be awarded to the plaintiff on account of the potential for payment of GST.


C. CAMPBELL J.

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