The appellant was the sole shareholder and sole director of a construction and heavy equipment rental business corporation (JDR). JDR had made purchases from various suppliers on behalf of a client. CRA and the Court accepted that JDR had acted as an agent of the client, and therefore the amounts paid by the client were reimbursements, exempt from GST. However, JDR had also claimed ITCs for the GST included in the reimbursement amounts notwithstanding that such GST was not incurred by JDR, and those amounts were disallowed.
Paris J. found that the appellant could not establish due diligence because his evidence was inadequate regarding his bookkeeper, who allegedly was responsible for the erroneous ITC claim. The appellant had neither called her as a witness, nor brought evidence to establish her training and qualifications. There was therefore no basis on which to conclude that the appellant's reliance on the bookkeeper met the standard of a reasonably prudent person in the circumstances.