The taxpayer (“LBL” or “Lumsden”), a subsidiary of Sobeys Group Inc., carried on business as a wholesaler, including of tobacco products, and sold $97,715,258 of tobacco products between January 1, 1999 and February 29, 2000 to a status Indian (Roberta MacNaughton) who operated a variety store on a Six Nations reserve, or to members of her immediate family, also on the reserve. As soon as LBL delivered the products to the store or an adjacent garage, and it received cash payment, the products were loaded onto the waiting trucks of customers, in turn, of Roberta MacNaughton. The Minister’s position was that LBL sold the tobacco products to such third party customers who were not status Indians, with the MacNaughtons being compensated for their involvement in this scheme through volume rebates – so that such sales were not exempted under s. 87 of the Indian Act.
In finding that the MacNaughtons were the "recipients" of the sales as defined in ETA s. 123(1), so that the sales were so exempted, Visser J stated (at paras. 142, 147):
[T[he MacNaughtons were the recipients of the supplies of the Tobacco Products during the Periods. … Roberta MacNaughton … entered into an oral agreement with Lumsden to purchase the Tobacco Products from Lumsden, and it was Roberta MacNaughton who was liable under that agreement to pay Lumsden for the Tobacco Products. As a result, it is my view that Roberta MacNaughton was a recipient pursuant to paragraph (a) of the definition of “recipient”. If paragraph (a) did not apply, it is my view that paragraph (b) of the definition of “recipient” would apply in the alternative because it is my view …the MacNaughtons were liable to pay the consideration for the purchase of the Tobacco Products. ...
I also note that the sale of the Tobacco Products from Lumsden to Roberta MacNaughton often resulted in a resale to her customers almost simultaneously. They were in essence flash sales, which are common types of sales.