"Wily entrepreneurs such as Mr. Cao, the principal of the two Appellants, circumvent this regional launch management through a series of micro-managed purchases of product in the protective market (Canada) followed by the expedited unmonitored export of the product into the prohibited market for its subsequent re-sale (in this case Hong Kong). In doing so, the gray marketeers reap enhanced profits associated with selling the product first in the prohibited market and at the same time violating the spirit and intent of the original equipment manufacturer (in this case Apple Inc).
"the method followed by the Appellants was refined, organized and lithe." (Paras. 1-3)
The TCC relied, strangely, on the agency rule in s. 177 of the Excise Tax Act. That rule would apply if the question was whether the appellants had made taxable supplies through its agents. Here, the question was whether the appellants had bought Apple products through their agent-suppliers. Still, the TCC rightly looked at whether the suppliers could be "agents" of the appellants when buying iphones from Apple. Justice Bocock thought they could not:
"Had the alleged agency been disclosed at the outset, Apple would have refused to make the sale. If and when the agency became apparent, Apple would have invalidated the sale, warranty and its obligations under these voidable provisions. For agency to exist, it is mandatory that the agent have the ability to affect the principal’s legal position by entering into contracts on the principal’s behalf; a principal cannot appoint an agent to engage in a contractual entreaty into which the principal has no legal capacity or authority to enter: 1524994 Ontario Ltd. v. Canada, 2007 FCA 74 (CanLII), 2007 FCA 74 at paragraph 18." (Para. 17.)
See 2253787 Ontario Inc. v. The Queen, (2014 TCC Bocock)