The registrant ("Mattamy"), which was a housing developer, paid municipal development levies at the time it entered into a subdivision agreement with the municipality, or when the municipality issued building permits. The sales agreements with home purchasers stated the parties' agreement that "as part of …the Purchase Price herein, the Vendor has or will pay on behalf of the Purchaser…all applicable development charges…." Mattamy did not collect GST (aggregating $15 million) from the purchasers on amounts reimbursing it for the relevant development levies which had been charged to it (on a GST-exempt basis) by the municipality.
Woods J concluded that under the clause quoted above, it was agreed that "Mattamy pays the development charges on its own account, but for the ultimate benefit of Purchasers" (para. 36): first, the development charges often were paid by Mattamy prior to executing a sales agreement with its supposed principal, and were not payable if the purchaser terminated the sales agreement; and second, the agreement stated that the development charges were part of the purchase price (implying that they were paid by Mattamy on its own account).
Accordingly, the recoupment of the development charges by Mattamy was part of the sales consideration received by it, and was subject to GST.