Jayco, Inc. v. The Queen

Jayco, Inc. v. The Queen
Court (s) Database
Tax Court of Canada Judgments
Date
2018-02-16
Neutral citation
2018 TCC 34
File numbers
2015-3545(GST)G
Judges and Taxing Officers
Johanne D’Auray
Subjects
Part IX of the Excise Tax Act (GST)
Decision Content
Docket: 2015-3545(GST)G
BETWEEN:
JAYCO, INC.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeal heard on May 16, 17, 18 and 19, 2017,
at Vancouver, British Columbia.
Before: The Honourable Justice Johanne D’Auray
Appearances:
Counsel for the Appellant:
Jonathan Ip
David Douglas Robertson
Counsel for the Respondent:
Donna Tomljanovic
JUDGMENT
The appeal from assessments made under the Excise Tax Act dated March 26, 2012, for the periods April 1 through December 31, 2007; January 1 through December 31, 2008; and January 1 through December 31, 2009 is allowed and the assessments are referred back to the Minister of National Revenue for reconsideration and reassessment on the basis that:
The appellant was not required to charge and collect the GST/HST in respect of its supplies of recreational vehicles to Canadian dealers during the periods under appeal;
All other aspects of the assessments will remain unchanged;
With costs in favour of the appellant.
Signed at Ottawa, Canada, this 16th day of February 2018.
“Johanne D’Auray”
D’Auray J.
Citation: 2018 TCC 34
Date: 20180216
Docket: 2015-3545(GST)G
BETWEEN:
JAYCO, INC.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
D’Auray J.
I. INTRODUCTION [1] The appellant Jayco, Inc. (“Jayco”) appeals from notices of assessment issued by the Minister of National Revenue (“Minister”), which assessed Jayco for GST/HST owing under the Excise Tax Act[1] (the “ETA”) on sales of recreational vehicles (“RVs”) and of parts shipped from the United States to Canadian dealers from April 1, 2007 to December 31, 2009.
[2] As a result of the assessments, Jayco was assessed $14,178,034.81 composed of the uncollected GST/HST on sales of the RVs and the freight transportation service and the uncollected provincial component of the HST with respect to the parts. An additional $589,149.38 in interest was assessed against Jayco. Jayco subsequently remitted $50,000 plus interest on that amount with respect to certain itemized adjustments contained in the assessment which it no longer disputed. As a result, the total amount under dispute in this appeal is $14,717,184.19.
[3] Jayco’s argues that the RVs and the parts “were delivered or made available outside Canada” pursuant to paragraph 142(2)(a) of the ETA. Therefore, it did not have to collect and remit the GST/HST on the RVs. In addition, since the parts were not taxable supplies having also been delivered outside Canada, Jayco did not have to collect the provincial component of the HST on them.
[4] The respondent argues that the RVs and the parts were “delivered or made available in Canada” pursuant to paragraph 142(1)(a) of the ETA. Accordingly, Jayco should have collected and remitted the GST/HST on the RVs and on the parts.
[5] For the following reasons, I have decided that the RVs were delivered or made available outside Canada, at Jayco business’ premises in the USA, therefore the RVs do not constitute taxable supplies.
[6] For the parts, I have decided that the parts were delivered or made available in Canada, therefore the parts do constitute taxable supplies.
II. FACTS A. RVs [7] Jayco called three witnesses:
- Mr. John Wolf, an executive vice president and the chief financial officer of Jayco. Mr. Wolf works at Jayco’s Head Office in Middlebury, Indiana;
- Mr. Dale Wesley Howe, the sole shareholder and president of Traveland Leisure Vehicles Inc. (“Traveland Vehicles”), a RV Dealership in Langley, British Columbia and a Jayco authorized dealer since 1995;
- Mr. Paul D. Borghesani, a lawyer and member of the Indiana State bar. Mr. Borghesani testified as an expert witness on the law of Sale of Goods in Indiana.
[8] The respondent called one witness: Ms. Janice Cohoe. She is a large file auditor with the Canada Revenue Agency (“CRA”) and the auditor in charge of Jayco’s audit. She is a Certified Professional Accountant.
[9] Jayco is incorporated pursuant to the laws of the State of Indiana. Its Head Office and principal place of business are in Middlebury, Indiana. It has an additional manufacturing facility in Idaho, USA.
[10] Jayco’s business consists of manufacturing and selling various models of RVs and parts to dealers located throughout the USA and Canada.
[11] During the periods under appeal, most of Jayco’s sales were made to dealers located in the USA.
[12] During the periods under appeal, Jayco was registered for GST/HST purposes.
[13] To become an authorized dealer, Jayco required an applicant to complete a “Dealer Application Form”[2] and be approved by it.
[14] Once approved, the dealer had to enter into a “Dealership Sales and Service Agreement”[3] with Jayco.
[15] Once the Dealership Sales and Service Agreement was executed by Jayco and the dealer, the latter became an authorized dealer of Jayco. The dealer was then able to sell RVs and parts manufactured by Jayco to its customers.
[16] The Dealership Sales and Service Agreement was governed by the law of the State of Indiana.
[17] Authorized dealers ordered RVs from Jayco using its “Price Sheet and Order Form” (the “Order Form”).[4]
[18] The Order Form allowed the dealer to choose one of two options for shipment of the RV, namely the “Dealer pick up” option (“DPU”) or the “Other Transportation” option (“OT”).
[19] Under the DPU method of shipping, the dealer was responsible for picking up the RV at one of Jayco’s business locations in the USA or for arranging the delivery of the RV by a common carrier.
[20] Under the OT method of shipping, Jayco arranged to have a common carrier transport the RV from the USA to the dealer whether in the USA or in Canada.
[21] On the Order Form, the selling price for the RV was in US dollars and the price of the RV did not include freight transportation charges.
[22] Once an order was accepted by Jayco, it would send an Acknowledgement Order Number Form to the dealer.[5] If the dealer had indicated a method of shipment on the Order Form, it was mentioned in the Acknowledgement Number Order Form. The Acknowledgment Number Order Form contained the same information regardless of whether the DPU or the OT option had been chosen.
[23] Dealers paid for the RVs with financing obtained from inventory financing companies. To facilitate financing for the dealers, Jayco entered into agreements, referred to as manufacturer’s financing agreements (“MFA”)[6], with inventory financing companies, including Transamerica Financing Corporation and GE Commercial Distribution Finance Corporation.
[24] Prior to the completion of an RV, Jayco would send a notice to the dealer’s inventory financing company to seek approval and confirmation that the financing company would pay Jayco, on behalf of the dealer, for the RV.[7]
[25] If the inventory financing company approved Jayco’s request, it would issue an approval number to Jayco confirming that it would advance funds to Jayco as payment for the RV upon the issuance of an invoice by Jayco to the financing company. The approval number of the financing company had to be on the invoice.[8]
[26] Jayco Enterprise Transportation Inc. (“JET”) was a freight transportation company and a wholly-owned subsidiary of Jayco. Mr. Wolf testified that once the RV was manufactured and if the OT option had been chosen, the RV was transferred to JET’s OT lot for shipping purposes. On the other hand, if the DPU method of shipping was chosen by the dealer, once manufactured the RV was transferred to the DPU lot. JET leased the OT lot from Jayco.
[27] According to Mr. Wolf, only employees of JET had access to the DPU and the OT lots.
[28] JET’s primary role was to act as the common carrier of first instance for Jayco in arranging the shipment of products released to it by Jayco to dealers throughout the USA and Canada. Mr. Wolf testified that at times, JET hired other common carriers to transport Jayco’s products. JET also provided freight transportation services to third parties.
[29] Therefore, once a dealer’s inventory financing company confirmed that it would pay for an RV and the manufacturing of the RV was completed and it was ready for shipment, regardless of the shipping option chosen by the dealer, DPU or OT, Jayco would:
a) prepare and issue an invoice to the inventory financing company of the dealer;[9]
b) move the RV either directly from its production line or from its finishing goods inventory lot, to the DPU lot or the OT lot, both under the supervision of JET, for shipping purposes;
c) notify the dealer that the RV was ready for shipment by sending electronically a “Dealer Ready to Ship Advisory”.[10] On this form, Jayco wrote “that the above unit(s) are now ready to ship. They have been released for shipment”.
[30] With respect to the invoices prepared and issued to a dealer’s inventory financing company:
a) regardless of whether the DPU or the OT option had been chosen by a Canadian dealer, the invoices were “BILLED TO” the dealer’s inventory financing company and under “SHIPPED TO” the destination address indicated was the address of the dealer in Canada;
b) if the dealer chose the DPU method of shipping, the invoice issued by Jayco for the RV was the sale price of the RV in US dollars;
c) if the dealer chose the OT option of shipping, the invoice issued by Jayco for the RV included the sale price of the RV in US dollars and the freight transportation service costs also in US dollars. These latter costs were indicated separately from the price of the RV.
[31] Mr. Wolf described the transportation charge on several occasions as “pass-through” fees, which he said were intended purely to offset the expenses to Jayco. He characterized Jayco’s approach as follows:[11]
Our company had always taken the position that our primary or core business was the manufacture and sale of recreational vehicles and parts. We were not in the business of making money on freight. It was simply convenience to our dealers. It was simpler for us administratively just do to straight pass through.
[32] Mr. Wolf testified that it was Jayco that determined the cost of the freight transportation service, since at the time of the invoice it did not know exactly how much JET would be charging Jayco. He stated that there were essentially three elements to the freight transportation charge: a base shipping charge (the “destination charge”), a fuel surcharge, and a Canadian Surcharge.
[33] Mr. Wolf explained that the base destination charge was based on mileage and each zone had a fixed rate. The fuel surcharge was based on the national diesel fuel average price as reported on the eia.gov website on a weekly basis. The Canadian Surcharge was a rate per mile negotiated by JET and the drivers. In addition, drivers were paid their out of pocket expenses.
[34] Mr. Wolf stated that Jayco attempted to recover from the dealers all the freight costs that it paid to JET. That said, this was not always possible on individual sales. Therefore, Jayco could only attempt to achieve a pass-through system on a company-wide basis. Mr. Wolf testified that Jayco did not make a profit on the freight transportation service. He indicated that the reason why the freight transportation service was on the Jayco invoice and not on a JET invoice was to allow the dealer to finance these costs via the dealer’s inventory financing company. The freight costs were high and this was a way of assisting the dealers.
[35] Mr. Wolf also testified that the dealers remained free to provide additional instructions to Jayco regarding the transportation arrangements. He described the range of these instructions as follows:[12]
There would be situations where - not related to this type of product series, but on some of our smaller trailers that we produce, should a dealer order, for example, our fold-down camping trailer series, it’s possible that we can deliver up to six of those units on a single, we call them “decker”, which is a trailer, much like automobiles are delivered. So, if a dealer places an order, obviously it reduces the shipping cost per unit, if we’re able to consolidate loads like that. We also produce other small travel trailers, some only 12 - 14 feet long. There are two other ways those might be shipped to our dealer. One method is what we call “Low boys”, where we have a long, flatbed trailer, that depending on the length of the trailer that the dealer has ordered, we can ship two or three. So that the dealer can request multiple orders be shipped in that method. They could also suggest in the event they had an immediate need for a trailer that could have been delivered with another unit or two on a lowboy, if they need it immediately they could request it be shipped what we call “single pull” or by a pickup truck. So, and then the third and final option, there were a few carriers that had a truck with a shorter flatbed with a hitch on the back. So essentially a dealer could request, in that case up to two units delivered at the same time. One on the flatbed, the other one towed.
[36] Mr. Wolf also testified that Jayco was acting on behalf of the Canadian dealer when arranging the delivery of an RV. He testified that once the RV was turned over to the common carrier, the ownership of the RV was transferred to the owner.
[37] Mr. Howe, the Canadian dealer, confirmed the testimony of Mr. Wolf. He stated that in arranging delivery with JET, Jayco was acting on behalf of his dealership, Traveland Vehicles. He also stated that Traveland Vehicles became the owner of the RV at the time it was turned over to JET, since at that time Traveland Vehicles became liable to pay for the RV. He also stated that he was the importer of record for the RV.
[38] For Canada customs purposes, each RV that was shipped to Canada was accompanied by an original certificate of origin,[13] a Canada Customs invoice,[14] a copy of the original invoice,[15] a Jayco ready-to-ship-advice[16] and a bill of lading,[17] regardless of whether the DPU option or the OT option of shipping had been chosen by the dealer.
[39] The certificate of origin that accompanied the RV was always dated on or before the date the RV was picked up by the common carrier for shipment to the dealer.
[40] The ready-to-ship-advice was prepared by Jayco when the RV was transferred to the carrier to be shipped to Canada. It was signed by the carrier’s driver at the time the carrier took possession of the RV. The point of dispatch on the ready-to-ship-advice was USA.
[41] Mr. Wolf also reviewed a sample Canada Customs Invoice.[18] Under the Conditions of Sale and Term of payments, it was indicated “USA”.
[42] For Mr. Wolf, these were all indications that the delivery of the RV took place at the business premises of Jayco in the USA.
[43] Since the Canadian dealers acted as importer on record, they paid the GST on the importation of the RV to Canada Customs at the time of importation into Canada.
[44] Mr. Wolf was asked whether Jayco had any discussions with its Canadian authorized dealers regarding the time and place of legal delivery on sales of RVs. Mr. Wolf confirmed that, during the period in issue, no such discussions had occurred.[19] Mr. Wolf stated that the same method was followed for USA shipments and Canadian shipments. Once the RV was transferred to JET’s OT lot, the dealer became the owner of the RV and if damages occurred during the transportation, the dealer had to deal with the common carrier and not Jayco.
[45] Mr. Wolfe stated that Jayco did not collect the GST/HST on the RVs sold to Canadian dealers during the period under litigation, regardless of the shipment option used, namely DPU or OT.
[46] The Minister did not assess Jayco with respect to the supply of RVs made using the DPU method of shipping. The Minister’s position is that the RVs purchased by Canadian dealers and shipped using the DPU method were delivered outside of Canada and did not constitute taxable supplies. In issue, therefore, are only the supply of RVs made by Jayco where the OT method of shipping was used by the Canadian dealers.
B. Parts [47] According to paragraphs 20s) and t) of the Reply to Notice of Appeal, the Minister, in assessing Jayco on the sales of parts, relied upon the following assumptions of fact:
s) In the period of April 1, 2007 through December 31, 2009, Jayco did not collect the GST/HST in respect of the sales of RVs or parts it arranged to deliver to Canadian customers.
t) In the period of April 1, 2007 through December 31, 2009, the Canadian customer acted as the importer of record for the RVs or parts imported into Canada and paid tax under the Division III of Part IX of the ETA (Tax on Importations of Goods).
[48] The evidence has established that these two assumptions are incorrect. Contrary to paragraph 20s), it is clear from the testimony of Mr. Wolf and the documents submitted in evidence that when the OT option was chosen, the GST was collected and remitted by Jayco with respect to parts. However, the provincial component of the HST was not collected on parts shipped to a Canadian dealer located in an HST participating province. In addition, the GST/HST was not collected by Jayco on the freight transportation service relating to the parts.
[49] Contrary to paragraph 20t), during the period of April 1, 2007 through December 31, 2009, the Canadian dealers were not the importers of record with respect to the parts. Jayco was.
[50] That said, there are some similarities between the RVs and the parts. For example, the Canadian dealers could choose the DPU method of shipment and pick up the parts at one of Jayco’s facilities in the USA or the dealers could choose the OT method of shipping and have Jayco arrange their shipment to Canada.
[51] During the periods under litigation, Jayco stated that it retained Frontier Supply Chain Solutions (“Frontier”) exclusively to assist it in shipping parts. Frontier is a customs broker and logistics firm.
[52] Orders for parts from Canadian dealers were processed by Jayco’s parts department in Middlebury, Indiana. Once an order was received, the department would select, pack, label and address the requested part(s). Jayco then consolidated all the parts’ orders bound for Canada. Daily, Frontier would arrange for a carrier, namely, Alvin Motor Freight Inc., to pick up the consolidated orders at Jayco’s premises in Middlebury and ship them to Frontier’s facility in Bensenville, Illinois.
[53] At its facility in Bensenville, Illinois, Frontier further consolidated the parts’ orders into one master load. Then nightly Alvin Motor Freight Inc. transported the load from Frontier’s Bensenville facility to Frontier’s facility in Winnipeg, Manitoba with one bill of lading for the entire shipment. Jayco was the importer of record.
[54] Once in Winnipeg, Frontier separated the consolidated shipment into orders bound for eastern Canada and those bound for the western Canada. Frontier then contracted with third party carriers to deliver them to the dealers.
[55] Frontier then invoiced Jayco for freight services, customs duties, and the GST it had paid on Jayco’s behalf to Canada Customs.
[56] In turn, Jayco invoiced the Canadian dealers for the parts, the GST and the freight costs without any mark up for the freight costs. In filing its GST returns, Jayco reported the GST and claimed input tax credits (“ITCs”).
[57] Relying on the advice of Frontier, Jayco only collected from the dealers the GST charged to it by Frontier. Therefore, the provincial component of HST was not collected by Jayco. Nor did Jayco collect the GST/HST on freight transportation services since Frontier did not collect them.
[58] Jayco’s position is that it was not required to collect the GST on parts since the parts were delivered or made available outside Canada pursuant to paragraph 142(2)(a) of the ETA. Jayco submits that the GST it paid on the parts was paid in error. It follows that Jayco did not have to collect and remit the provincial component of the HST on parts.
[59] In addition, Jayco argues that the parts and the freight transportation services are multiple supplies. The freight transportation of tangible personal property is zero rated, pursuant to section 8 of Schedule V1, Part VII of the ETA. Therefore, Jayco submits that it was not obliged to collect GST/HST on the freight transportation services.
[60] The respondent took the same position as she did for the RVs. She argued that in light of the contractual relationship, express or implied, between Jayco and the Canadian dealers, Jayco agreed to deliver the parts to the Canadian dealers at their business’ premises in Canada. In addition, she stated that Jayco was not acting on behalf of the Canadian dealers in arranging the delivery of the parts. In addition, Frontier was not acting on behalf of the Canadian dealers, since it is clear from the evidence that Frontier acted as the agent of Jayco. The contractual relationship was between Frontier and Jayco and not Frontier and the Canadian dealers.
III. PRELIMINARY ISSUES [61] Before addressing the issues under appeal, I first have to deal with two procedural objections: one raised by Jayco and the other by the respondent.
[62] Jayco argues that I cannot entertain the respondent’s argument that JET is not a separate corporate entity but rather an extension of Jayco since this issue was not raised in her Reply to Notice of Appeal. In order to do so, I would have to pierce the corporate veil.
[63] I agree with Jayco. Since the issue was not raised in the respondent’s pleading and the respondent did not ask to amend her Reply, I will not entertain it.
[64] For her part, the respondent argues that the issue of whether the freight transportation service was a taxable supply or not and whether it constituted a single supply or multiple supplies, could not be raised before me.
[65] In her written submissions filed on February 2, 2018, the respondent points out that although Jayco raised the issue at trial, it had failed to do so in its Notice of Appeal.
[66] I agree with the respondent. Since Jayco did not raise the issue in its Notice of Appeal, it was not entitled to do so at trial.
[67] Although this is sufficient to dispose of this objection, there is a further reason for supporting the respondent’s objection. The respondent pointed out that since Jayco was a specified person pursuant to subsections 301(b) and 301(1.2) of the ETA, it could not have raised the issue of the taxability of the freight transportation service in its Notice of Appeal pursuant to paragraph 306.1(1) of the ETA, since the issue was not raised its Notice of Objection.
[68] In light of the amounts in issue, it is clear that Jayco was a specified person under subsections 301(b) and 301(1.2) of the ETA. Under paragraph 306.1(1)(a) of the ETA, a specified person is not allowed to raise an issue in its Notice of Appeal, unless the issue was first raised in its Notice of Objection. Here, Jayco had not raised the issue of the taxability of freight transportation service in its Notice of Objection.
IV. ISSUES [69] Therefore, the issues in this appeal are:
- was Jayco required to collect and remit the GST/HST on the RVs it sold to Canadian dealers when the OT option method of shipping was chosen by the dealers?
- was Jayco required to collect and remit the provincial component of the HST on the parts shipped from the USA to Canada?
V. APPELLANT’S POSITION [70] Jayco submits that the RVs and the parts were “delivered or made available outside Canada” to the Canadian dealers pursuant to paragraph 142(2)(a) of the ETA. Neither the RVs nor the parts were taxable supplies. Jayco submits that it did not have to collect and remit the GST/HST on these supplies. In addition, Jayco submits that it was acting on behalf of the Canadian dealers when arranging delivery of the goods to Canada.
[71] Jayco argues that the RVs and parts were delivered and made available to the Canadian dealers at its manufacturing facilities in Indiana and Idaho when the products were turned over to the common carrier, JET with respect to the RVs and Frontier with respect to the parts.
[72] Jayco submits that its position is confirmed by the testimonies of Mr. Wolf and Mr. Howe and the documentary evidence. Jayco argues that there was an implicit agreement between Jayco and the Canadian dealers that the delivery of the RVs and the parts took place outside Canada at Jayco’s business premises in the USA.
[73] Jayco also argues that if the contractual relationship between Jayco and the Canadian dealers is not sufficient to allow me to determine where the delivery occurred with respect to the RVs and the parts, I have to apply the provisions dealing with the sale of goods in Indiana, namely the Uniform Commercial Code‑Sales Chapter 26 (“IC-26-1-2”). This legislation is similar to the Sale of Goods legislation in effect in Ontario, British Columbia and Alberta. Jayco submits that under the provisions of the IC-26-1-2, delivery occurred at the place of business of Jayco in the USA.
VI. RESPONDENT’S POSITION [74] The respondent’s position is that the RVs and the parts were delivered or made available in Canada pursuant to paragraph 142(1)(a) of the ETA. Therefore, the supplies are taxable. She argues that the evidence supports a contractual relationship between the Canadian dealers and Jayco, whereby Jayco agreed to deliver, in Canada, the RVs and parts it sold to the Canadian dealers. She argued that this relationship may be inferred, either from the documents or from the course of conduct of Jayco and the Canadian dealers. She submits that the documents between Jayco and the Canadian dealers created an expectation on the part of the Canadian dealers that the RVs would be delivered to Canada.
[75] The respondent argued that for the Canadian dealers, it did not matter if the RVs were delivered by Jayco or JET, as long as the RVs were delivered to their business’s premises in Canada. In any event, she argued that JET acted as an agent of Jayco and not as agent of the Canadian dealers, when delivering the RVs to the Canadian dealers.
[76] The respondent submitted that Jayco could not have been acting as an agent on behalf of the Canadian dealers when arranging the transportation with JET for delivery in Canada, since under the general provisions of the Dealership Sales and Services Agreement, Jayco could not act as agent for the dealers.
VII. ANALYSIS A. Was Jayco required to collect and remit the GST/HST on the RVs it sold to Canadian dealers when the OT option method of shipping was chosen by the dealers? [77] This issue turns on whether paragraph 142(1)(a) or 142(2)(a) of the ETA applies.
[78] Paragraph 142(1)(a) of the ETA provides that in the context of the sale of tangible personal property, a supply is deemed to be made in Canada, and thus subject to the GST/HST, if the property is delivered, or made available to the recipient of the supply, in Canada. Paragraph 142(1)(a) reads as follows:
142(1) For the purposes of this Part, subject to sections 143, 144 and 179, a supply shall be deemed to be made in Canada, if
(a) in the case of a supply by way of sale of tangible personal property, the property is, or is to be, delivered or made available in Canada to the recipient of the supply;
[79] Conversely, paragraph 142(2)(a) of the ETA provides that the supply of tangible personal property by way of sale is deemed to be made outside Canada if the property is delivered or made available outside Canada to the recipient of the supply. Paragraph 142(2)(a) reads as follows:
142(2) For the purposes of this Part, a supply shall be deemed to be made outside Canada if
(a) in the case of a supply by way of sale of tangible personal property, the property is, or is to be, delivered or made available outside Canada to the recipient of the supply;
[80] The ETA does not define the meaning of the phrase “delivered or made available” which is used in both paragraphs 142(1)(a) and 142(2)(a) of the ETA. However, in light of the jurisprudence the words “delivered or made available” is to be interpreted in the same manner as the concept of “delivery” in the sale of goods legislation.[20] The meaning of “delivery” is well established under such legislation.[21]
[81] In its GST/HST Memorandum,[22] the CRA has adopted this jurisprudence and indicated that the phrase, “delivered or made available” in Canada or outside Canada used in paragraphs 142(1)(a) and 142(2)(a), is to be given the same meaning as that assigned to the concept of “delivery” in sale of goods legislation. The memorandum states as follows:
7. For purposes of paragraph 142(1)(a) and 142(2)(a) which deems supplies of tangible personal property by way of sale to be made in Canada or outside Canada, the phrase “delivered or made available” has the same meaning as that assigned to the concept of “delivery” under the law of the sale of goods, as follows:
• “Delivered” refers to those situations where delivery of the tangible personal property under the applicable law of the sale of goods is effected by actual delivery.
• “Made Available” refers to those situations where delivery of the tangible personal property under the applicable law of the sale of goods is effected by constructive delivery (i.e., actual physical possession of the tangible personal property is not transferred to the recipient of the supply yet is recognized as having been intended by the parties and as sufficient in law). For example, situations arise when a person sells tangible personal property to another person and agrees to hold the property as bailee for the buyer.
8. In any given case, the place where the tangible personal property is delivered or made available may be determined by reference to the place where the tangible personal property is considered to have been delivered under the law of the sale of goods applicable in that case.
9. Generally, the place where tangible personal property is delivered or made available can be determined by reference to the terms of the contract.
10. In common law provinces, the law of the sale of goods is primarily contained in the appropriate Sale of Goods Act. In the province of Quebec, the obligation of the seller to deliver tangible personal property to the buyer is contained in the Civil Code rather than in a Sale of Good Act.
11. In those cases where the contract between the parties is governed by the United Nations Convention on Contract for the International Sale of Goods (Convention), the place where the tangible personal property is delivered or made available will have to be determined in accordance with the rules relating to delivery contained in the Convention rather than in accordance with the domestic law of any province.
[Underlining added.]
[82] The Dealership Sales and Service Agreement provides that relationship between Jayco and authorized dealers is to be governed by the laws of the State of Indiana.[23] Therefore, regard must be had to the law of that jurisdiction.
[83] As foreign law is a matter of fact to be proved at trial through a qualified witness, Jayco called as a witness Mr. Borghenasi to explain the provisions of IC 26-1-2 and how they applied to the transactions in this appeal.
[84] Mr. Borghenasi referred to the following provisions of IC 26-1-2, that he stated were relevant.
[85] Under subsection 201.(14) of IC-26-1-2, delivery is defined as:
201.(14) – “Delivery” means the following:
(A) With respect to an electronic document of title, voluntary transfer of control;
(B) With respect to instruments, tangible documents of title, chattel paper, or certificated securities, voluntary transfer of possession.
[86] Under section 301 of IC 26-1-2, the general obligations of the parties in a sales transaction are set out:
General Obligation-Sec. 301. The obligation of the seller is to transfer and deliver and that of the buyer is to accept and pay in accordance with the contract.
[87] Subsection 308(a) of IC 26-1-2 provides that in the sale of goods, the place of delivery is the seller’s place of business, unless otherwise agreed:
Absence of specified place for delivery- Sec 308. Unless otherwise agreed:
(a) The place for delivery of goods is the seller’s place of business or if he has none his residence; but
(b) In a contract for sale of identified goods which to the knowledge of the parties at the time of contracting are in some other place, that place is the place for their delivery; and . . .
[88] Section 503 of IC 26-1-2 sets out the rules respecting tender of delivery:
Manner of seller’s tender of delivery-Sec. 503 (1) Tender of delivery requires that the seller put and hold conforming goods at the buyer’s disposition and give the buyer any notification reasonably necessary to enable him to take delivery. The manner, time and place for tender are determined by the agreement and IC 26-1-2, and in particular:
(a) tender must be at a reasonable hour, and if it is of goods they must be kept available for the period reasonably necessary to enable the buyer to take possession; but
(b) unless otherwise agreed, the buyer must furnish facilities reasonably suited to the receipt of the goods.
(2) Where the case is within IC 26-1-2-504 respecting shipment, tender requires that the seller comply with its provisions.
(3) Where the seller is required to deliver at a particular destination, tender requires that he comply with subsection (1) and also in any appropriate case tender documents as described in subsections (4) and (5).
(4) Where goods are in the possession of a bailee and are to be delivered without being moved:
(a) tender requires that the seller either tender a negotiable document of title covering such goods or procure acknowledgement by the bailee of the buyer’s right to possession of the goods; but
(b) tender to the buyer of a nonnegotiable document of title or of a record directing the bailee to deliver is sufficient tender unless the buyer seasonably objects, and except as otherwise provided in IC 26-1-9.1, receipt by the bailee of notification of the buyer’s rights fixes those rights as against the bailee and all third persons; but risk of loss of the goods and of any failure by the bailee to honor the nonnegotiable document of title or to obey the direction remains on the seller until the buyer has had a reasonable time to present the document or direction, and a refusal by the bailee to honor the document or to obey the direction defeats the tender.
(5) Where the contract requires the seller to deliver documents:
(a) he must tender all such documents in correct form, except as provided in IC 26-1-2-323(2) with respect to bills of lading in a set; and
(b) tender through customary banking channels is sufficient and dishonor of a draft accompanying the documents constitutes non-acceptance or rejection.
[89] With respect to shipment by a seller, section 504 of IC 26-1-2 provides as follows:
Shipment by seller- Sec. 504. Where the seller is required or authorized to send the goods to the buyer and the contract does not require him to deliver them at a particular destination, then unless otherwise agreed he must
(a) put the goods in the possession of such a carrier and make such a contract for their transportation as may be reasonable having regard to the nature of the goods and other circumstances of the case; and
(b) obtain and promptly deliver or tender in due form any document necessary to enable the buyer to obtain possession of the goods or otherwise required by the agreement or by usage of trade; and
(c) promptly notify the buyer of the shipment.
[90] In his written summary opinion, Mr. Borghesani stated as follows:
Under the laws of the State of Indiana, unless otherwise agreed by the seller and the buyer:
the place of delivery of goods is the sellers’ place of business or, if the seller does not have place of business, his residence, but
if the contract for sale of identified goods which to the knowledge of the parties at the time of contracting are in some other location than the seller’s place of business or residence, that place is the place of delivery.
If the seller is required or authorized to send the goods to the buyer, in order to effect tender of delivery, unless otherwise agreed between the seller and buyer, the seller must
put the goods in the possession of a carrier and make a contract for their transportation as may be reasonable having regard to the nature of the goods and other circumstances of the case,
obtain and promptly deliver or tender in due form any document necessary to enable the buyer to obtain possession of the goods or otherwise required by the agreement between the seller and buyer or by usage of trade, and
promptly notify the buyer of the shipment.
However, regardless of whether the seller is required or authorized to send the goods to the buyer, the place of delivery remains the place agreed between the seller and the buyer, or in the absence of such agreement, the seller’s place of business or residence.
[91] Therefore, under IC-26-1-2, absent an agreement between the seller and the buyer, delivery occurs at the seller’s place of business. Where the seller is authorized, as here, to send the goods to the buyer, the seller has to put the goods in the hands of a carrier and notify the buyer of the shipment. In these circumstances, the place of delivery is the seller’s place of business. This principle was confirmed by the Court of Appeal of Indiana, Fourth District in Dept., State Rev. v Martin Marietta Corp.,[24] where Justice Miller, writing for the Court, stated as follows:
The sales contracts between Standard and its customers were shipment contracts. Title to the goods passed and delivery occurred when the goods were loaded onto the common carrier for shipment to Standard’s purchasers.
[92] Mr. Borghesani also opined that once a seller turns the goods over to the buyer, the buyer becomes responsible for any damages incurred during transportation as title has passed to it. Mr. Borghesani noted, however, that the provisions of the US Transportation Code dealing with Bill of Lading issued by a common carrier for the transportation of goods from a place in a State to a place in a foreign country, rendered the carrier liable for any damages to the goods while in transit.[25] Therefore, if damages were to occur to goods in transit, the Canadian dealer would have to deal with the carrier (JET) and not the seller (Jayco).
[93] Absent an agreement between Jayco and its Canadian dealers on place of delivery, it is clear from a reading of section 308(a) of the IC-26-1-2 and the testimony of Mr. Borghesani that delivery of the RVs to the dealers would have occurred at Jayco’s place of business in the USA.
[94] However, section 308 of IC 26-1-2 permits a seller and purchaser to agree on a place of delivery other than the default one of the seller’s place of business or residence. Both parties submit that there was such an agreement.
[95] The respondent submits that there was an agreement between Jayco and the Canadian dealers that the delivery of the RVs would take place at the dealers’ business premises in Canada and that therefore the default place of delivery provided in section 308(a) of IC 26-1-2 was inapplicable. She states that the contractual relationship setting out the place of delivery is to be inferred from the conduct of Jayco and the dealers and the documentary evidence.
[96] Jayco, on the other hand, submits that it had agreement with the Canadian dealers to arrange for the delivery of the RVs at its business premises in the USA. In support of its position, it points to the testimonial evidence, its conduct and that of its Canadian dealers and the documentary evidence.
[97] After an analysis of the evidence