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…." The development levies which were so reimbursed by the home purchasers were found to be part of the taxable consideration for such home sales, with the result that Mattamy was found to have been understating the sales price to the purchasers. As the new housing rebates ("NHRs") of the purchasers (which they had assigned to Mattamy and which it had rebated to them as contemplated in s. 234(1)) decreased as the sales price increased above $350,000, this increased taxable consideration decreased the NHRs which were properly claimable on some of the sales.
In finding that Mattamy was liable under s. 254(6) for the overstated amount of the NHR rebate claims, Woods J stated (at para. 92) that "in accordance with judicial interpretation of the phrase ‘ought to have known'…the test is an objective one," and then stated (at para. 94):
In my view, a reasonable person in Mattamy's circumstances would have concluded, based on competent professional advice, that the Purchasers did not pay development charges qua development charges. Quite simply, this is the only reasonable conclusion that may be drawn from the Purchase Agreements. Because the amount of a NHR is a function of the consideration for the home, it follows that a reasonable person would have known that some of the amounts paid or credited by Mattamy in respect of Purchasers' NHR claims were excessive.