The appellant (CanLII) was a not-for-profit corporation that operated an open-access virtual law library. Its sole member was the Federation of Law Societies of Canada (Federation), which collecting fees from 14 law societies in Canada to fund all of CanLII’s operating budget of around $3 million per annum, and claimed input tax credits of over $0.7 million for the 27 month period in issue on its taxable purchases. The Minister disallowed these ITCs on the basis that CanLII provided its service for no consideration and, therefore, provided an exempt supply pursuant to Sched. V, Pt. V, s. 10.
In finding that CanLII instead was making a taxable supply, so that it was entitled to ITCs, Lamarre ACJ stated (at paras. 39-40):
… I note that the definition of “consideration” in [s. 123(1) of] the ETA … states that consideration “includes” any amount that is payable for a supply by operation of law. …
Therefore, I do not read the definition as imposing a requirement for an enforceable legal obligation to pay as argued by the respondent.
She went on to state (at paras. 50-51):
[A]lthough the Federation (through its council composed of representatives of each of the 14 law societies in Canada) determined the amount of the levy to be paid on an annual basis to CanLII on the latter’s recommendation, once that amount was in fact determined, the Federation had an obligation to pay such amount to CanLII. Further, the Council determined under the Governance Agreement (between the Federation and the law societies) the amount that each law society had to pay toward any such levy. The Federation only had discretion to determine the amount of the levy. Once established, the levy was payable to CanLII for the supply of the virtual library.
Therefore, I find that, by virtue of article 14 of the By-law and article 15 of the Governance Agreement, once the Federation had determined the amount of the annual levy, the levy was paid by operation of law for the supply of the virtual library. There was an obligation on the Federation to pay and payment was not discretionary as argued by the respondent.
In rejecting a Crown submission, she stated (at para. 54):
I agree with CanLII that a direct link exists between the payment of the levy by the Federation and the supply of the virtual library. …