ONR Limited Partnership v. The King

ONR Limited Partnership v. The King
Court (s) Database
Tax Court of Canada Judgments
Date
2024-12-11
Neutral citation
2024 TCC 156
File numbers
2016-1588(GST)G
Judges and Taxing Officers
Don R. Sommerfeldt
Subjects
Part IX of the Excise Tax Act (GST)
Decision Content
Docket: 2016-1588(GST)G
BETWEEN:
ONR LIMITED PARTNERSHIP,
Appellant,
and
HIS MAJESTY THE KING,
Respondent.
Appeals heard on April 25‑27, 2023, April 3, 2024 and May 8, 2024, at Toronto, Ontario
Before: The Honourable Justice Don R. Sommerfeldt
Appearances:
Counsel for the Appellant:
Bobby J. Sood
Counsel for the Respondent:
Pascal Tétrault
Benjamin Grant
Veronica Pinero
JUDGMENT
Having considered the evidence and the submissions presented by the parties, and in accordance with the attached Reasons for Judgment (the “Reasons”),
IT IS ADJUDGED THAT:
The Appeals are allowed and the reassessments that are the subject of the Appeals are referred back to the Minister of National Revenue for reconsideration and reassessment, on the basis that, for the reporting periods that are the subject of the Appeals, the Appellant is entitled to additional input tax credits in the amount of $97,125.55, subject to paragraph 229 of the Reasons.
As success is divided, I am not inclined to award costs to, or against, either party.
Signed at Ottawa, Canada, this 11th day of December 2024.[1]
“Don R. Sommerfeldt”
Sommerfeldt J.
Citation: 2024 TCC 156
Date: 20241211
Docket: 2016-1588(GST)G
BETWEEN:
ONR LIMITED PARTNERSHIP,
Appellant,
and
HIS MAJESTY THE KING,
Respondent.
REASONS FOR JUDGMENT
Sommerfeldt J.
I. INTRODUCTION
[1] These Appeals relate to the disallowance of input tax credits (the “ITCs”) in the total amount of $318,939.86, which had been claimed by Retrocom Limited Partnership (the “LP”) in respect of nine monthly reporting periods (the “Reporting Periods”) from March 1, 2013 to October 31, 2013 and from December 1, 2013 to December 31, 2013.[2]
[2] The only witness called by counsel for the LP was Kimberly Tam, an accountant, who previously worked for the LP as its director of finance, and who, at the time of the trial, was the vice president of corporate planning and new initiatives of SmartCentres Real Estate Investment Trust (“SmartCentres REIT”), which, in 2017, acquired all the outstanding units of Retrocom Real Estate Investment Trust (the “REIT”).
[3] The only witness called by counsel for the Crown was Robert Wolf, who was a trustee of the REIT from 2010 until 2017, when the REIT was sold to SmartCentres REIT.
II. ISSUE
[4] The issue in these Appeals is whether, and to what extent (if any), the LP is entitled to the ITCs, for the Reporting Periods, that were disallowed by the Minister of National Revenue (the “Minister”), as represented by the Canada Revenue Agency (the “CRA”).
III. FACTUAL BACKGROUND
A. Organizational Structure
[5] The supplies that gave rise to the disallowed ITCs occurred over a three‑year period extending from 2011 through 2013. Throughout that time, the LP (which had been established and formed as a limited partnership, under the laws of Ontario, on July 11, 2003) was the subject of, and governed by, an agreement titled “Third Amended and Restated Limited Partnership Agreement,” dated October 31, 2010 (the “LP Agreement”).[3]
[6] As will be explained below, there was a close relationship between the LP and the REIT, which was known as “Retrocom Mid‑Market Real Estate Investment Trust” in 2011, 2012 and early 2013, and which was subsequently known as “Retrocom Real Estate Investment Trust”, after a change of name in April 2013.[4]
[7] Section 5.1 of the LP Agreement provided that the authorized capital of the LP consisted of an unlimited number of Class A Units issuable in series (the “Class A LP Units”) and an unlimited number of non‑voting Class B Units issuable in series (the “Class B LP Units”). The Class A LP Units carried full voting and participating rights. The Class B LP Units were intended to be the economic equivalent of the units of the REIT (the “REIT Units”). Specifically, each Class B LP Unit was entitled to receive distributions equal to the distributions paid by the REIT in respect of a REIT Unit, and each Class B LP Unit was exchangeable into a REIT Unit. Each Class B LP Unit was accompanied by a special voting unit that entitled the holder to vote at meetings of LP Unitholders, but only in respect of matters affecting the rights of the Class B LP Units.
[8] The general partner of the LP was GP Trust, which was a trust formed under the laws of Ontario. The interest of GP Trust in the LP was described as the “General Partnership Interest”; it was a 0.01% voting interest, which was not represented by an issued certificate.[5] The sole beneficiary of GP Trust was 1090992 Alberta Inc., which was a wholly owned subsidiary of the REIT. The sole trustee of GP Trust was 1606906 Ontario Inc. (“160ON”), which was also a wholly owned subsidiary of the REIT.
[9] All of the issued Class A LP Units, representing a 99.99% voting interest in the LP, were held by the REIT.
[10] All of the issued Class B LP Units were held by six limited partnerships that represented a vendor group that had sold a portfolio of properties to the LP in 2008, in exchange for the assumption of mortgages on those properties and the issuance to that group of Class B LP Units.
[11] Under the business and organizational structure chosen by the REIT and the LP:
(a)the LP carried on the business (the “LP’s Business”) of acquiring, managing and leasing income‑producing community‑based retail properties (the “Properties”);[6]
(b)legal title to the Properties was held by the LP;
(c)as funds were required by the LP, the REIT offered REIT Units or debentures (the “Debentures”) to the public, and used the proceeds of those offerings (the “Offerings”) to subscribe for Class A LP Units; and
(d)as the REIT did not have a bank account of its own,[7] the LP issued cheques, drawn on its own chequing account, to make payments on behalf of the REIT.
B. Relevant Agreements and Deeds
(1) LP Agreement
[12] As noted above, the LP was the subject of, and governed by, the LP Agreement. Section 12.1 of the LP Agreement stated that the general partner of the LP (i.e., GP Trust) had “exclusive authority to administer, manage, conduct, control and operate the Business and affairs of the” LP.[8] That provision then went on to state:
No limited partner in its capacity as such shall:
(a) take part in the control or management of the Business of the Partnership or exercise any power in connection therewith;
(b) execute any document on behalf of the Partnership;
(c) represent that it has authority to bind the Partnership;
(d) have any authority to act for, bind or undertake any obligation or responsibility on behalf of the Partnership or any other Partner….[9] [Emphasis added.]
[13] As indicated by the italicized phrase in the first line of section 12.1 of the LP Agreement, the above restriction on the activities of a limited partner, such as the REIT, applied only to actions taken by a limited partner in its capacity as such. That restriction did not limit actions taken by a limited partner in some other capacity, such as an agent of the LP.
(2) Declarations of Trust
[14] During the Reporting Periods, the REIT was the subject of, and governed by:
(a) the Retrocom Mid‑Market Real Estate Investment Trust Fourth Amended and Restated Declaration of Trust, dated October 31, 2010;[10]
(b) the Retrocom Mid‑Market Real Estate Investment Trust Amendment No. 1 to Fourth Amended and Restated Declaration of Trust, dated April 11, 2013;[11] and
(c) Retrocom Real Estate Investment Trust Fifth Amended and Restated Declaration of Trust, dated August 1, 2013.[12]
(3) Agency Agreements
[15] Over the objection of counsel for the Crown, two agency agreements (the “Agency Agreements”), each between the REIT and the LP, and dated March 29, 2012 and January 1, 2013 respectively, were entered into evidence.[13] The Agency Agreement dated March 29, 2012 (the “2012 Agency Agreement”) appears to have been signed, on behalf of both the REIT and the LP, by Richard Michaeloff, who was then a trustee of the REIT and the president of 160ON, which was the sole trustee of GP Trust, which was the general partner of the LP. The Agency Agreement dated January 1, 2013 (the “2013 Agency Agreement”) appears to have been signed, on behalf of both the REIT and the LP, by Tom Wenner, who was then the chief financial officer of each entity.
(a) 2012 Agency Agreement
[16] In the recitals to the 2012 Agency Agreement,[14] the REIT and the LP acknowledged (among other things) that:
(a) the REIT had issued:
a. 9,832,500 REIT Units, pursuant to an Offering described in a prospectus dated March 8, 2011 (this Offering was defined in the 2012 Agency Agreement, and is referred to in these Reasons, as the “March 2011 Offering”); and
b. $40,000,000 in aggregate principal amount of 5.45% convertible unsecured subordinated debentures of the REIT, pursuant to an Offering described in a prospectus dated June 21, 2011 (this Offering was defined in the 2012 Agency Agreement, and is referred to in these Reasons, as the “June 2011 Offering”);
(b) the REIT had used the proceeds of the March 2011 Offering to purchase Class A LP Units (the “March 2011 Class A LP Units”);
(c) the REIT had used the proceeds of the June 2011 Offering to purchase Class A LP Units (the “June 2011 Class A LP Units”);
(d) the LP had used the proceeds of the issue of the March 2011 Class A LP Units (i) to partially fund the acquisition by the LP of four properties from Calloway Real Estate Investment Trust (the “Calloway Properties”),[15] and (ii) for general partnership purposes;
(e) the LP had used the proceeds of the issue of the June 2011 Class A LP Units (i) to fund redevelopment projects, (ii) to advance funds to the REIT (which were used by the REIT to redeem $20,000,000 in aggregate principal amount of then outstanding 7.50% convertible unsecured subordinated debentures of the REIT, and (iii) for general partnership purposes; and
(f) the REIT had incurred costs and expenses in connection with the March 2011 Offering and the June 2011 Offering (together, the “2011 Offerings”) and other related transactions on behalf of the LP.
[17] Subparagraph 2.1(c) of the 2012 Agency Agreement defined the term “Financing Costs” (which I will call the “2011 Financing Costs”, so as to distinguish those costs from other costs described below) as being the costs and expenses incurred by the REIT as agent of the LP in connection with the 2011 Offerings and other related transactions, including:
(a) commissions (including (i) the fees payable to the Underwriters (as defined in the 2012 Agency Agreement) pursuant to the underwriting agreement dated March 1, 2011 (the “March 2011 Underwriting Agreement”) between the REIT and the Underwriters, in respect of the March 2011 Offering, and (ii) the fees payable to the Underwriters pursuant to the underwriting agreement dated June 14, 2011 (the “June 2011 Underwriting Agreement”) between the REIT and the Underwriters, in respect of the June 2011 Offering, and also including, in each case, other costs and expenses related to raising capital to invest in the REIT);[16]
(b) costs and expenses relating to the negotiation, preparation, execution, delivery and interpretation of any agreements, instruments and offering documents, including the 2012 Agency Agreement (collectively defined in the 2012 Agency Agreement, and in these Reasons, as the “REIT Documents”) created, executed and delivered in respect of the raising of capital;
(c) the fees and expenses of consulting services and other expert or professional services in connection with the REIT Documents; and
(d) costs and expenses paid to obtain the advice of counsel with respect to the transactions contemplated under the REIT Documents.
[18] In paragraph 2.1(a) of the 2012 Agency Agreement, the REIT and the LP agreed that, because the 2011 Offerings had facilitated the LP’s acquisition of certain properties and had been used for general partnership purposes, the 2011 Financing Costs were costs and expenses of the LP and were to be borne and paid by, or on behalf of, the LP.
[19] In paragraph 2.1(b) of the 2012 Agency Agreement, the REIT and the LP agreed that, to the extent that the REIT had paid any 2011 Financing Costs on behalf of the LP, such 2011 Financing Costs were paid by the REIT as agent for the LP, and the LP was to repay and reimburse the REIT for the payment of such 2011 Financing Costs.
(b) 2013 Agency Agreement
[20] In the recitals to the 2013 Agency Agreement,[17] the REIT and the LP acknowledged (among other things) that:
(a) the LP was in the business of acquiring, developing and leasing real property;
(b) the LP had organized its operations such that, when it required financing to pay for acquisitions (the “Acquisitions”) of investment properties, it directed the REIT to undertake offerings (defined above as the “Offerings”) to raise such funds (the “Funds”) from the public;
(c) on the basis that the Funds received by the LP were to be used in the course of the LP’s commercial activities, and specifically to make the Acquisitions, the LP had agreed to pay the expenses related to the Offerings;
(d) the LP had authorized the REIT, as its agent, to enter into the necessary agreements with third parties for services and property necessary for the raising of the Funds;
(e) the LP and the REIT had previously entered into similar agency agreements with respect to specific Acquisitions; and
(f) the LP and the REIT had agreed, effective January 1, 2013, to enter into a more general agency agreement with respect to all Acquisitions and Offerings.
[21] In paragraph 2.1(a) of the 2013 Agency Agreement, the LP appointed the REIT as its agent, effective January 1, 2013, for the purposes of acquiring property and services relating to the Offerings. Further, the LP authorized the REIT to undertake all reasonable expenses (defined in the 2013 Agency Agreement, and in these Reasons, as the “2013 Financing Costs”) “on its behalf …, whether in its own name of in the name of the” LP.[18]
[22] In paragraph 2.1(c) of the 2013 Agency Agreement, the REIT and the LP agreed that the 2013 Financing Costs were costs of the LP and were to be borne and paid by, or on behalf of, the LP.
[23] In paragraph 2.1(d) of the 2013 Agency Agreement, the REIT and the LP agreed that, to the extent that the REIT had paid any 2013 Financing Costs on behalf of the LP, such costs were incurred, and were legally payable, by the LP, and accordingly were paid by the REIT in its capacity as agent for the LP.[19] Accordingly, the LP was to repay and reimburse the REIT for the payment of those previously paid 2013 Financing Costs.
C. Relevant Financings
[24] To raise money to purchase, develop, redevelop or refinance properties, the REIT undertook various public financings (the “Financings”) in 2011, 2012 and 2013, as follows:
(a)On March 15 and 18, 2011, the REIT completed an Offering (defined above as the “March 2011 Offering”) of 9,832,500 REIT Units for gross proceeds of $57.5 million.[20]
(b)On June 28, 2011, the REIT issued $40 million principal amount of 5.45% convertible unsecured subordinated debentures (pursuant to an Offering defined above as the “June 2011 Offering”).
(c)On February 3, 2012, the REIT completed an Offering of 5,175,000 REIT Units for gross proceeds of $29 million.[21]
(d)On November 9, 2012, the REIT completed an Offering of 7,947,500 REIT Units for gross proceeds of $44.5 million.[22]
(e)On May 27, 2013, the REIT completed an Offering (the “2013 Offering”) of 10,959,500 subscription receipts for gross proceeds of $57.5 million.[23] Upon the closing, on June 5, 2013, of an Acquisition of certain properties (the “First Capital Properties”) from First Capital Realty Inc. (“First Capital”),[24] each subscription receipt was exchanged for one REIT Unit plus $0.0375.[25]
(f)In May 2013, in conjunction with the 2013 Offering, the REIT also issued $25 million of debentures by way of the same amended and restated short form prospectus.
D. Subject Expenditures, Services and Invoices
[25] In conjunction with the Financings and certain other transactions, the REIT or the LP retained or engaged the services (the “Services”) of various underwriting, legal, audit, accounting, valuation, design, printing and stock‑transfer professionals. In so doing, the REIT or the LP made various expenditures (the “Expenditures”) in respect of professional and other fees. The REIT or the LP also paid listing fees to the TSX (which fees also formed part of the “Expenditures”).
[26] Over the course of the Reporting Periods (i.e., from March 1, 2013 to October 31, 2013 and from December 1, 2013 to December 31, 2013), the LP claimed ITCs aggregating $525,052.97. The Minister, as represented by the CRA, allowed only $206,113.11 of those ITCs. The CRA disallowed claimed ITCs in the amount of $318,939.86. The disallowed ITCs related to the Expenditures.
[27] At the trial, the primary evidentiary documents in respect of the Expenditures were the invoices (or portions thereof) (collectively, the “Invoices”) that the various suppliers had issued in respect of the particular Services that they had supplied. The Invoices are summarized below, with the Expenditures being categorized (by me) into four groups, as follows:
(1) Expenditures Relating to the REIT and the Financings
[28] The Invoices that related substantially or primarily to the REIT and the Financings are discussed below.
(a) Fasken Invoice No. 560606
[29] On April 18, 2011, the Toronto office of Fasken Martineau DuMoulin LLP (“Fasken”) issued Invoice no. 560606 to the LP, in the amount of $133, 026.71, for professional services in connection with a matter described as “2011 Equity Offering”.[26] The itemized amounts on the Invoice were a professional fee of $115,483.05, disbursements of $2,288.04, and HST of $15,255.62. A handwritten notation on the first page of the Invoice indicates that it related to the March 2011 Offering, which is confirmed by a review of the next 15 pages of the Invoice, which set out a dated description of the legal services provided by various lawyers (and perhaps other timekeepers) at Fasken.
[30] Most of the entries in the above description of Fasken’s services related to the March 2011 Offering; however, a few of the initial entries (on pages 2‑5) referred to the “proposed Calloway transaction” or variations of that phrase. Some of those latter entries (such as “TSXV and MI 61‑101 analysis of Calloway transaction”, “determination of significance of Calloway acquisition under income test”, “significance testing for Calloway transaction”, “review draft Calloway acquisition rider [in the context of the draft prospectus]”, “Review SEDAR disclosure regarding Calloway properties”, and “prepare disclosure regarding Calloway acquisition”) make it clear that those legal services related to the March 2011 Offering.
[31] Nevertheless, I accept that some of Fasken’s initial legal services, on January 3 and 4, 2011, related to the acquisition of the Calloway properties. Based on my review of the Invoice, I have allocated 2% of those legal services to the LP and its commercial activities. This corresponds to HST of $305.11 (i.e., $15,255.62 × 0.02).
(b) Fasken Invoice No. 582365
[32] On July 20, 2011, the Toronto office of Fasken issued Invoice no. 582365 to the LP, in the amount of $106,197.99, for professional services in connection with a matter described as “2011 Debenture Offering”.[27] The itemized amounts on the Invoice were a professional fee of $92,871.90, disbursements of $1,123.24, and HST of $12,202.85. A handwritten notation on the first page of the Invoice indicates that it related to “$40M Conv. Deb. Expensed Transaction Costs” (which was the subject of the June 2011 Offering) , which is confirmed by a review of the next 10 pages of the Invoice, which set out a dated description of the legal services provided by various lawyers and paralegals at Fasken.
[33] Most of the entries in the above description of Fasken’s services related to the June 2011 Offering; however, one entry (on page 3) referred to work done on June 10, 2011 by Martin Fisher‑Haydis in respect of a “significant acquisition”, but the same entry also refers to “discussions … regarding form 44‑101F1 requirements relating to significant acquisitions”, which causes me to think that much of the 3.7 hours worked by Mr. Fisher‑Haydis on that day related to the June 2011 Offering, more so than to an Acquisition.
[34] A second entry (on page 5) refers to 0.8 hour of work by Andrew Teehan described as “Drafted business acquisition report for the Calloway property acquisition”. Based on my review of Invoice no. 261659, I have allocated 1% of the legal services that are the subject of that Invoice to the Acquisition of the Calloway Properties. This corresponds to HST of $122.03 (i.e., $12,202.85 × 0.01).
(c) Fasken Invoice No. 760080
[35] On September 30, 2013, the Toronto office of Fasken issued Invoice no. 760080 to the LP, in the amount of $423,431.70, for professional services in connection with a matter described as “2013 Equity Offering”.[28] The itemized amounts on the Invoice were a professional fee of $366,000.50, disbursements of $8,853.87, HST of $48,396.94, and the British Columbia provincial sales tax (“PST”) of $180.39. A review of the Invoice confirms that most of the described legal services related to the 2013 Offering (as defined in subparagraph 24(e) above).
[36] However, Invoice no. 760080 contained a few entries that related to the Acquisition of the First Capital Properties. For instance, on May 1, 2013, an associate worked on “Correspondence regarding Retrocom acquisition from First Capital”, and a paralegal worked on “new incorporations for June acquisition”. On May 3, 2013, a different paralegal began to work on the incorporation of eight federal corporations that were to be used to acquire some of the First Capital Properties, and a different associate began a “review [of a] purchase and sale agreement” (although a reading of that associate’s complete time entry seems to suggest that he was reviewing the purchase and sale agreement in order to disclose it in the prospectus related to the 2013 Offering). From May 6, 2013 to June 7, 2013 there were numerous time entries, mostly by several paralegals (but a few by associates), who were working on the incorporation and organization of the eight federal corporations, as well as other corporations in Québec, Alberta and British Columbia, which were to be used as nominee corporations in the Acquisition of the First Capital Properties. There were several other time entries, by associates and paralegals, that referred to the “First Capital matter” or the “First Capital acquisition”, or to “Correspondence with Goodmans (who seemed to be lead counsel for the LP in respect of the Acquisition of the First Capital Properties). Notably, one time entry by a partner related to “Numerous emails and telephone calls regarding acquisition and private placement closing”, and a time entry by an associate related to “Correspondence regarding BC notices of change and registrations in Land Titles Office.”
[37] In view of the time entries described in the previous paragraph, as well as other similar time entries in Invoice no. 760080, I have allocated 10% of the legal services that were the subject of that Invoice to the Acquisition of the First Capital Properties. This corresponds to HST of $4,839.69 (i.e., $48,396.94 × 0.10).
(d) KPMG Invoice No. 44045537
[38] On May 6, 2011, the Toronto office of KPMG LLP (“KPMG”) issued Invoice no. 44045537 to the LP, in the amount of $102,773.50.[29] The itemized amounts on the Invoice were a professional fee of $85,000, a CPAB participation fee surcharge (at 2%) of $1,700, an administration fee of $4,250, and HST of $11,823.50. The Invoice contained the following description:
Billing for professional services rendered in connection with the filing of the short form prospectus of Retrocom Mid‑Market Real Estate Investment Trust relating to the sale and issue of trust units as noted in our engagement letter dated February 22, 2011.[30]
[39] Thus, although the above Invoice was addressed to the LP, the Services that were the subject of the Invoice related to the filing by the REIT of its Prospectus (as defined below) in respect of the March 2011 Offering of REIT Units.
(e) KPMG Invoice No. 7000002022
[40] On June 19, 2013, the Toronto office of KPMG issued Invoice no. 7000002022 to the LP, in the amount of $114,864.50.[31] The itemized amounts on the Invoice were a professional fee of $95,000, an administrative surcharge of $4,750, disbursements of $1,900, and HST of $13,214.50. The Invoice contained the following description:
Billing for professional services rendered in connection with the filing of the short form prospectus of Retrocom Mid‑Market Real Estate Investment Trust relating to the sale and issue of subscription receipts and convertible debentures as noted in our engagement letter dated May 2, 2013.[32]
[41] Thus, although the above Invoice was addressed to the LP, the Services that were the subject of the Invoice related to the filing by the REIT of its Prospectus (as defined below) in respect of the 2013 Offering by the REIT of subscription receipts and debentures.
(f) E&Y Invoice CA0189780361
[42] On May 13, 2013, the Toronto office of Ernst & Young LLP (“E&Y”) issued Invoice no. CA0189780361 to the REIT, in the amount of $80,006.83.[33] The itemized amounts on the Invoice were aggregate professional fees and expenses of $70,802.50, and HST of $9,204.33. The description on the Invoice stated:
DESCRIPTION
CAD
Billing for the professional services rendered in connection with the review of Q1 2012 and 2013
$30,000.00
Billing for the professional services rendered in connection with the review of 2011 and work related to the Prospectus
30,000.00
For procedures performed in relation to the amended prospectus
3,500.00
Expenses
7,302.50
Subtotal:
70,802.50
HST 13% Ontario:
9,204.33
TOTAL DUE:
80,006.83
[43] During her direct examination, Ms. Tam explained that the first item in the above description related to E&Y’s review engagement in respect of Q1 2012 and 2013 of the LP’s financial statements, and the second item related to E&Y’s engagement to review the Prospectus for one of the Financings.[34]
[44] Although the second and third items in the above description related to a Financing, based on my understanding that the financial statements of the REIT, the LP and perhaps other entities were consolidated, I am of the view that the first item (which dealt with the consolidated financial statements) related, in part, to the LP and its commercial activities. Accordingly, based on my review of the Invoice, I have allocated 25% of the fees for that item to the LP. This corresponds to HST in the amount of $975 (i.e., $30,000 × 0.25 × 0.13).[35]
(g) TSX Invoice No. INV-100-0059702
[45] On May 31, 2013, TSX Inc. (“TSX”) issued Invoice no. INV‑100‑0059702 to the REIT, in the amount of $158,617.74.[36] The itemized amounts on the Invoice were a fee of $140,369.68, and GST/HST of $18,248.06. The Invoice described the product/service as “Additional Listing Fee — Public Offering — Prospectus Offering and Supplemental Listing of Subscription Receipts and 5.5% Extendible.”
[46] This Invoice related to the REIT and one of the Financings, and not to the LP.
(h) TSX Invoice No. INV-100-0059703
[47] Also on May 31, 2013, TSX issued Invoice no. INV‑100‑0059703 to the REIT, in the amount of $11,300.[37] The itemized amounts on the Invoice were a fee of $10,000, and GST/HST of $1,300. The Invoice described the product/service as “Filing Fee — Prospectus Offering and Supplemental Listing of Subscription Receipts and 5.5% Extendible.”
[48] Like the preceding Invoice, this Invoice related to the REIT and one of the Financings, and not to the LP.
(i) TSX Invoice No. INV-100-0060576
[49] On June 18, 2013, TSX issued Invoice no. INV‑100‑0060576 to the REIT, in the amount of $25,846.21.[38] The itemized amounts on the Invoice were a fee of $22,872.75, and GST/HST of $2,973.46. The Invoice described the product/service as “Additional Listing Fee — Public Offering — Prospectus Offering and Supplemental Listing of Subscription Receipts and 5.5% Extendible.”
[50] Like the preceding two Invoices, this Invoice related to the REIT and one of the Financings, and not to the LP.
(j) TSX Invoice No. INV-100-0063952
[51] On August 31, 2013, TSX issued Invoice no. INV‑100‑0063952 to the REIT, in the amount of $12,084.97.[39] The itemized amounts on the Invoice were a fee of $10,694.68, and GST/HST of $1,390.31. The Invoice described the product/service as “Additional Listing Fee — Private Placement — Acquisition of 2 Properties Co‑owned by SmartCentres and Wal art [sic][40].”
[52] Notwithstanding that the description on this Invoice referred to an acquisition of two properties, inasmuch as the invoice was for an additional listing fee, it is my view that the Invoice related primarily to the REIT and one of the Financings, and not to the LP.
(k) RR Donnelley Invoice No. 19-53096400
[53] On June 27, 2013, RR Donnelley Canada, a Division of Moore Canada Corporation (“RR Donnelley”) issued Invoice no. 19‑53096400 to the REIT, in the amount of $49,281.17.[41] The itemized amounts on the Invoice were a fee of $39,032.48 for prepressing, printing, binding, distributing, desktop publishing and electronically distributing a Final Prospectus and an Amended Final Prospectus, messenger services and freight charges of $4,595.22, GST of $205.45, PST‑BC of $233.58, HST‑ON of $5,137.42 and QST of $77.02.
[54] As the RR Donnelley Invoice pertained to a Final Prospectus and an Amended Prospectus, it related to the REIT, and not to the LP.
(l) RICOH Invoice No. TOR13060839
[55] On June 27, 2013, RICOH Canada Inc. (“RICOH”) issued Invoice no. TOR13060839 to Fasken, in the amount of $1,105.14.[42] The itemized amounts on the Invoice were total sales of $978, and PST/HST/QST of $127.14. The Invoice related to the preparation of closing books in respect of a Financing.
[56] Even though Ms. Tam indicated that Fasken engaged RICOH on behalf of the LP, I am of the view that the closing books related to the REIT and one of the Financings, and not to the LP.
(m) Aikins Invoice No. 751506
[57] On June 30, 2013, Aikins, MacAulay & Thorvaldson LLP (“Aikins”) issued Invoice no. 751506 to the REIT, in the amount of $3,384.37.[43] The itemized amounts on the Invoice were a fee of $2,700, disbursements of $16.26, service and other charges of $111.50, PST of $189, and GST/HST of $367.61. The Invoice related to professional services in connection with a matter described as “Retrocom Mid‑Market Real Estate Investment Trust — Offering of Subscription Receipts and Debentures”. The itemized Services included reviewing a preliminary prospectus, a final prospectus and an amended and restated prospectus, drafting an opinion and corresponding with the client.
[58] It is my view that the Aikins Invoice related primarily to the REIT and one of the Financings, and not to the LP.
(n) Stewart McKelvey Invoice No. 90316212
[59] On June 30, 2013, the Saint John office of Stewart McKelvey issued Invoice no. 90316212 to Fasken, in the amount of $1,896.37.[44] The itemized amounts on the Invoice were a fee for professional services and other charges of $1,663.75, disbursements of $14.45, and HST of $218.17. The Invoice related a matter described as “Retrocom Mid‑Market Real Estate Investment Trust — Offering”. The Invoice did not itemize the legal services performed by Stewart McKelvey.
[60] It is my view that the Stewart McKelvey Invoice related primarily to the REIT and one of the Financings, and not to the LP.
(o) MLT Invoice No. 534970
[61] On July 15, 2013, the Regina office of MacPherson Leslie & Tyerman LLP (“MLT”) issued Invoice no. 534970 to the REIT, in the amount of $2,389.50.[45] The itemized amounts on the Invoice were a professional fee of $2,025 (with no disbursements), PST of $101.25, and GST/HST of $263.25. The Invoice related to professional services in connection with a matter described as “Offering of 9,530,000 Subscription Receipts and $25,000,000 Aggregate Principal Amount of 5.5% Extendible Convertible Unsecured Subordinated Debentures”. The itemized Services were reviewing a Prospectus, drafting an opinion and corresponding with the client.
[62] It is my view that the MLT Invoice related primarily to the REIT and one of the Financings, and not to the LP.
(p) TD Securities Invoice No. T2013-174
[63] On July 5, 2013, TD Securities issued Invoice no. T2013‑174 to the REIT, in the amount of $95,055.05.[46] The itemized amounts on the Invoice were underwriting syndicate expenses (referencing an invoice issued by Torys LLP (“Torys”)) in the amount of $91,682.10, and out‑of‑pocket expenses in the amount of $3,372.95. The TD Securities Invoice also indicated that Torys’ legal invoice included HST of $10,535.53.
[64] Ms. Tam stated that TD Securities had been the lead underwriter for the 2013 Offering of REIT Units, that Torys had been legal counsel to the underwriters and that the issuer (i.e., the REIT) was responsible for Torys’ fee.[47]
[65] It is my view that the TD Securities Invoice related to the REIT and one of the Financings, and not to the LP.
(2) Other Expenditures Relating to the REIT
[66] Other Invoices that related substantially or primarily to the REIT are discussed below.
(a) Nope Invoices No. 01306 and No. 01309
[67] On February 27, 2013, Nope Advertising & Design (“Nope”) issued Invoice no. 01306 to the REIT, in the amount of $15,639.20.[48] The itemized amounts on the Invoice were a price of $13,840, and HST of $1,799.20. The Invoice showed the job type as “Design”, and it described the subject of the Invoice as “2012 Retrocom Reit [sic] Annual Report Design & Printing (1/2 Payment)”. The amount of the Invoice was paid to Nope by a cheque drawn on the LP’s bank account.[49]
[68] During her direct examination, Ms. Tam confirmed that the Invoice related to the REIT’s 2012 annual report.[50] In response to a question from the LP’s counsel, asking whether Nope’s work was “related to the financings that the REIT was engaged in”, Ms. Tam said that the amount of the Invoice formed some of the LP’s marketing costs that were incurred “in order to just get the names out there, [so] that the general public investors [would] become aware of the investment pieces that will be in matters of such. So it would be required as part of the financing initiative.”[51]
[69] On April 10, 2013, Nope issued Invoice no. 01309 to the LP (notwithstanding that the previous Invoice had been addressed to the REIT), in the amount of $19,594.20.[52] The total price (as it was called in the Invoice) was $17,340.00, allocated as follows:
Job Type
Description
Price
DESIGN
2012 Retrocom REIT Annual Report Design & Printing (2/2 Final Payment)
$13,840.00
PHOTO
Photo Shoot/Media Day (March 5 & 6)
$2,000.00
DESIGN
2012 Quarterly Report Covers
$1,500.00
SUBTOTAL
$17,340.00
The amount of the HST was $2,254.20.
[70] During her direct examination, Ms. Tam described the second Nope Invoice in this manner:
This pertains to the second payment to Nope Advertising related to their providing the work for helping the REIT to compile its annual report and its associated design and printing, as well as some of the photo shoot expenses as related to the management team of the partnership.[53]
[71] Given that the photo shoot and media day Services related to the LP’s management team, I consider those Services to have related to the LP’s commercial activities. As the price of those Services was $2,000.00, the corresponding HST was $260 (i.e., $2,000.00 × 0.13).
[72] When asked by counsel for the LP whether the second Nope Invoice “in any way related to the financing activities that were being carried on by the REIT”, Ms. Tam replied:
That’s correct. The partnership, through the REIT, would need marketing to the costs such as these to be incurred in order to produce the annual report, which goes into public offering documents of raising the financing.[54]
[73] The LP did not put into evidence any agreement, engagement letter, work order or other similar document in respect of the Services provided by Nope. Therefore, I cannot ascertain whether the quarterly report covers related to the REIT or the LP. Given that the initial item in the Invoice related to the REIT’s annual report, I assume that the quarterly report covers also related to the REIT.
[74] Based on the description in Nope’s Invoices, it appears that the Expenditures in respect of the 2012 annual report and 2012 quarterly report covers did not relate to the Acquisitions, the Properties or the LP.
(b) KPMG Invoice No. 44712193
[75] On March 15, 2013, the Toronto office of KPMG issued Invoice no. 44712193 to the LP, in the amount of $17,263.58.[55] The itemized amounts on the Invoice were a professional fee of $14,550, disbursements of $727.50, and HST of $1,986.08. The Invoice indicated that the professional services that were the subject of the Invoice related to the following (together with the fee allocation, disbursements and HST):
Description
Note
Amount
Our review and assistance with the preparation of the calculation of Retrocom Mid‑Market REIT’s 2012 taxable income and CDS reporting;
(REIT)
$6,000.00
Assistance and advice in connection with drafting the Agency Agreement;
(LP)
2,800.00
Review of the income tax disclosure in the October 31, 2012 Short … Prospectus;
(LP)
450.00
Assistance and advice in connection with the Deferred Unit Plan; and
(REIT)
3,000.00
Various discussions in connection with the tax implications of current versus capital expenditures and the implication of a potential asset acquisition with respect to the REIT rules.
(LP)
2,300.00
14,550.00
Disbursements, including secretarial
(LP)
727.50
15,277.50
HST
1,986.08
$17,263.58
[76] The second column in the above reproduction of the above KPMG Invoice sets out various handwritten annotations made by someone whose identity is not known to me. Notwithstanding those handwritten annotations, subject to the next paragraph, it is my view that only the second and the fifth entries above (i.e., the drafting of the 2013 Agency Agreement and the potential asset acquisition) related entirely to the LP’s commercial activities. The HST in respect of those two entries was $663 (i.e., ($2,800 + $2,300) × 0.13). The first, third and fourth entries related to the REIT or the Financings.
[77] With respect to the first entry above, Ms. Tam testified that, because the REIT’s financial statements were consolidated, some of the income‑tax‑related services provided by KPMG related to the LP.[56] Based on my review of the Invoice, I have allocated 25% of the fee for the income‑tax‑related services to the LP and its commercial activities, which corresponds to HST in the amount of $195 (i.e., $6,000 × 0.25 × 0.13).
[78] The total of the allocated HST amounts in the preceding two paragraphs is $858 (i.e., $663 + $195).
(c) KPMG Invoice No. 44712223
[79] On March 15, 2013, the Toronto office of KPMG issued Invoice no. 44712223 to the LP, in the amount of $108,154.00.[57] The itemized amounts on the Invoice were a professional fee of $89,450, a CPAB participation fee surcharge (at 2%) of $1,789, disbursements of $4,472.50, and HST of $12,442.50. The subject of the Invoice was described as “Final billing for professional services rendered in connection with the audit of Retrocom Mid‑Market REIT for the year ended December 31, 2012”.
[80] In my view, this Invoice related primarily to the REIT. However, as noted above, Ms Tam stated that the financial statements of the REIT and the LP were consolidated.[58] Based on my review of