The appellant (the “LP”) was a wholly-owned limited partnership of a REIT. The REIT and the LP entered into two successive written forms of agency agreements pursuant to which, in order to raise money for the LP’s real estate business, the REIT was authorized to raise money through REIT unit or debenture offerings and to incur the related costs as agent for the LP. Sommerfeldt J found that the valid execution of one of the two agreements had not been established and that the existence of an agency agreement had not otherwise been established. However, he also found that the offering expenses could not in any event have been incurred by the REIT as agent for the LO, stating (at para. 137):
[T]he LP, being a partnership, did not have the legal capacity to issue units of a real estate investment trust (or of any trust, for that matter). Therefore, the LP did not have the capacity to authorize the REIT to undertake, as the LP’s agent, and on behalf of the LP, the Offerings of REIT Units, or, on the closing of those Offerings, to issue, as the agent, and on behalf, of the LP, the REIT Units to members of the public.
Furthermore, the REIT used the proceeds to subscribe for LP units rather than in the LP’s business. Accordingly, the LP was not entitled to ITCs for various expenses of the offerings, and other “public company” expenses such as of AIFs.
On the other hand, although it was noted (at para. 217) that Telus (2009 FCA 49) had found that “only the person to whom a supply is made can claim the related ITC”, any expenses that related to the acquisition of the real estate properties of the LP or otherwise to those properties “were acquired by the LP for consumption or use in the course of the LP’s commercial activities” (para. 226) and, by virtue of s. 6 of the Partnerships Act (Ontario) (every partner is an agent of the partnership), those expenses were incurred by the REIT on behalf of the LP.