Vocan Health Assessors Inc. v. The Queen

Vocan Health Assessors Inc. v. The Queen
Court (s) Database
Tax Court of Canada Judgments
Date
2021-08-06
Neutral citation
2021 TCC 49
File numbers
2015-2586(GST)G
Judges and Taxing Officers
Kathleen T. Lyons
Subjects
Part IX of the Excise Tax Act (GST)
Decision Content
Docket: 2015-2586(GST)G
BETWEEN:
VOCAN HEALTH ASSESSORS INC.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeal heard on February 10, 11, 12, 13, 2020 and continued on September 2, 2020, at Toronto, Ontario
Before: The Honourable Justice K. Lyons
Appearances:
Counsel for the appellant:
Naresh Misir Ken Singh Devendranauth Misir
Counsel for the respondent:
Christopher Bartlett
JUDGMENT
The appeal from the assessment under Part IX of the Excise Tax Act for the reporting periods from March 1, 2009 to February 29, 2010, March 1, 2010 to February 28, 2011, and March 1, 2011 to February 29, 2012 is dismissed.
Costs are awarded to the respondent. The respondent shall provide written submissions on costs within 30 days from the date of this Judgment. Vocan shall provide written submissions on costs within 30 days from the filing date of the respondent’s submissions. The respondent shall provide their reply within 15 days
of the filing date of Vocan’s submissions. All submissions and reply shall be restricted to no more than 15 pages in length.
Signed at Nanaimo, British Columbia, this 6th day of August 2021.
“K. Lyons”
Lyons J.
Citation: 2021 TCC 49
Date: 20210806
Docket: 2015-2586(GST)G
BETWEEN:
VOCAN HEALTH ASSESSORS INC.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Lyons J.
I. INTRODUCTION
[1] Vocan Health Assessors Inc., the appellant, (“Vocan”), provided two services: treatment and supplied assessment reports to insurance companies or legal representatives (“referring source”) in respect of individuals injured in motor vehicle accidents (“individuals”). Vocan contracted with various types of assessors to prepare the assessment reports in respect of the individuals. Assessors billed Vocan and were compensated by Vocan for services rendered. Vocan billed the referring source for the assessment reports, for a marked-up fee, and was compensated by the referring sources. Assessment reports assist insurers in the determination of injured individuals’ entitlement to insurance benefits.
[2] Vocan appeals the assessment by the Minister of National Revenue under the Excise Tax Act (“ETA”). [1] The assessment for the reporting periods ending between March 1, 2009 to February 28, 2011 (collectively “both Periods”) is in respect of Goods and Services Tax (“HST”) collectible but not charged pertaining to the supply of assessment reports Vocan made to referring sources, and gross negligence penalties levied for HST not charged for the supply of the assessment reports. The assessment for the reporting period from March 1, 2011 to February 29, 2012 (“2012 Period”) is in respect of the input tax credit (“ITC”) amount disallowed.
[3] Vocan asserts the service (the supply of assessment reports) it provided during both Periods is an exempt supply pursuant to section 2 of Part II of Schedule V of the ETA, thus penalties were incorrectly levied, and the ITC it claimed for the 2012 Period should not be reduced.
II. ISSUES
[4] This appeal raises the following issues:
a) Whether the supply of assessment reports to referring sources during both Periods is taxable or exempt under Part IX of the ETA?
b) If it is found the supply is taxable, whether the Minister properly imposed penalties for both Periods pursuant to section 285 of the ETA?
c) What, if any, additional amount of ITC is Vocan entitled to?
[5] At the hearing, Vocan abandoned its alternative argument that the supply of assessment reports was zero-rated.
III. SUMMARY OF FACTS
[6] Vocan called eight witnesses to testify on its behalf.
Vocan
[7] Kashmira Handy, Vocan’s owner, operator and sole director, testified it is in the health care business, conducts assessments and treats mostly individuals that sustained injuries in motor vehicle accidents. It was created because she perceived a cultural insensitivity to individuals’ needs.
[8] Vincent Rabbaya, Vocan’s Manager of Operations responsible for its day-to-day operations, has a BSc in physiotherapy from the Philippines but is not a regulated health professional in Canada nor an assessor. He testified Vocan had four employees in 2012 and provided services that consisted of assessments and physiotherapy to injured individuals suffering physically or psychologically.
[9] Siva Vimalachandran, Vocan’s bookkeeper and a part-time employee from 2009 to 2012 (the “bookkeeper”), had previous training and experience in general accounting but did not have an accounting designation.
[10] The following assessors provided some background as to their credentials and testified that during 2009 to 2012 they prepared assessment reports arising from their assessments of injured individuals.
Practitioners
[11] Knolly Hill, a psychologist licensed in Ontario since 1987, confirmed during cross-examination he has a PhD in psychology.
[12] David Kunashko, a chiropractor licensed in Ontario since 1992, conducted assessments for Vocan since 2007 and up to 2012 and is governed by the Chiropractic Act, 1991, of Ontario, which sets out the scope of the work. When he entered practice, there was funding from Ontario Health Insurance Plan (“OHIP”) for chiropractors but not in 2009 nor 2012.
[13] Saeid Gholeizadeh, a physiotherapist licensed in Ontario since 2002 under the Ontario Health Act and Physiotherapy Act, is a member of the College of Physiotherapists of Ontario, is not restricted to physiotherapy and has certain specialties like acupuncture. He agreed that licensed physiotherapists can only bill OHIP if registered.
[14] These Practitioners agreed they are not medical doctors (Medical Practitioners) nor a member of the Ontario College of Physicians and Surgeons. Ms. Handy agreed and accepted that the remaining Practitioners, the Nurse and Other Assessors are not medical doctors.
Medical Practitioners
[15] Dr. Alex Pister, a dental surgeon licensed to practise in Ontario since 1983 and a member of the Royal College of Dental Surgeons of Ontario, did temporal mandibular joint (“TMJ”) assessments.
[16] Dr. M. K. Joseph Kwok, an orthopaedic surgeon licensed to practise in Ontario since 1976, became a specialist to do surgery in 1980 and did orthopaedic assessments.
Credibility findings and observations
[17] Ms. Handy’s evidence was self-serving, there were inconsistencies in her testimony compared with others and she obfuscated in parts. Parts of her evidence were not credible and other parts were not reliable. Mr. Rabbaya’s evidence was generally clear and credible. Aspects of Mr. Vimalachandran’s evidence tended to be confusing and therefore unreliable, and other aspects were internally inconsistent thus not credible. Overall, the assessors’ evidence was credible and presented in a forthright manner.
[18] Terms used by Vocan in its pleading and some used at trial were confusing at times. For instance, some Practitioners were referred to as “doctor” even though they are not Medical Practitioners as defined in section 1 of Part II of Schedule V of the ETA. Its pleading uses terms “providers”, “health care providers”, “health care practitioners” and “health care professionals” interchangeably and to encompass all assessors that prepared assessment reports even though some assessors are not health professionals in the health professions specified on Schedule 1 of the Regulated Health Professions Act, 1991 (“RHPA” and “Schedule 1”). [2]
[19] Four types of assessors are defined below in paragraph 10 of the partial Statement of Agreed Facts (“agreed facts”). Twenty sample assessment reports, arising from the assessments, were tendered at the hearing. [3] It would be useful to mention that when testifying witnesses described an assessment in various ways. Namely, independent medical examination (used by some Medical Practitioners), evaluation, functional capacity evaluation, follow-up in-home assessment, ergonomic intervention, work-site survey, document review rebuttal and other descriptors. [4]
Agreed Facts
[20] The agreed facts indicate:
1. Vocan Health Assessors Inc. (the “Appellant”) was incorporated in 2005.
2. The Appellant’s sole shareholder was Kashmira Handy.
3. The Appellant is a GST registrant.
4. The Appellant filed its return on an annual basis.
5. This appeal relates to the annual reporting periods from:
(a) March 1, 2009 to February 28, 2010 (the “2010 period”);
(b) March 1, 2010 to February 28, 2011 (the “2011 period”); and
(c) March 1, 2011 to the end of February 2012 (the “2012 period”).
6. On or around August 25, 2010, the Appellant filed a GST/HST return for the 2010 Period reporting nil GST/HST and total input tax credits (“ITCs”) of $6,260.17. On or around September 13, 2010, the Appellant filed an Amended GST/HST return for the 2010 Period reporting nil GST/HST and nil ITCs.
7. The following table sets out the amounts that the Appellant reported in its Amended GST/HST return for the 2010 Period, its GST/HST return for the 2011 Period and its GST/HST return for the 2012 Period, as well as the amounts that were assessed in the assessments under appeal:
Period
2010
2011
2012
Reported
Assessed
Reported
Assessed
Reported
Assessed
GST/HST Sales
NIL
$1,244,727
NIL
$1,261,821
$431,703
$431,703
GST/HST Collectible
NIL
$62,236
NIL
$127,224
$66,279
$66,279
ITCs
NIL
NIL
NIL
NIL
$58,544.33
$24,648
Net Tax
NIL
$62,236
NIL
$127,224
$13,181
$41,631
A copy of the Goods and Services Tax/Harmonized Sales Tax (Re)Assessment dated December 27, 2013 in respect of the 2010, 2011 and 2012 Periods is located at tab 1 of the Joint Book of Documents.
8. At all relevant times, the Appellant provided two types of services:
(a) it supplied assessment reports (“Assessment Reports”); and
(b) it provided treatment to individuals.
9. The Assessment Reports were in respect of individuals who had been injured in motor vehicle accidents for the purpose of determining whether the individuals were entitled to benefits pursuant to the Statutory Accident Benefits Schedule, O. Reg. 34/10, and the Insurance Act, R.S.O. 1990, c. 1.8.
10. The Appellant contracted with assessors, each of whom were either:
(a) a dentist, an orthopedic specialist, a physiatrist, or a psychiatrist (collectively, the “Medical Practitioners”);
(b) a nurse (the “Nurse”);
(c) a chiropractor, an occupational therapist, a physiotherapist, or a psychologist (collectively, the “Practitioners”); or
(d) a social worker or a vocational rehabilitation counselor (collectively, the “Other Assessors”)
11. The Medical Practitioners were members of the Ontario College of Surgeons and Physicians or the Royal College of Dental Surgeons of Ontario.
12. The Nurse was registered with the College of Nurses of Ontario.
13. The Practitioners were registered with the College of Chiropractors of Ontario, the College of Physiotherapists of Ontario, or the College of Psychologists of Ontario.
14. The Other Assessors were not entitled under the laws of any province to practise the profession of medicine or dentistry, and did not practise the profession of optometry, chiropractic, physiotherapy, chiropody, podiatry, osteopathy, audiology, speech-language pathology, occupational therapy, psychology, midwifery, dietetics, acupuncture or naturopathy as a naturopathic doctor.
15. When an individual was referred to the Appellant for an Assessment Report, a form OCF-22 (Application for Approval of an Assessment or Examination) was completed and submitted to the applicable insurance company to request prior approval for payment of an assessment or examination fee. A copy of a blank OCF-22 is located at tab 2 of the Joint Book of Documents.
16. If approved, an Assessment Report and, if applicable, a form OCF-18 (Treatment and Assessment Plan) were prepared. A copy of a blank OCF-18 is located at tab 3 of the Joint Book of Documents.
17. Each OCF-22, OCF-18 and Assessment Report was completed by an Assessor.
18. The Assessors billed the Appellant for the services rendered and were compensated by the Appellant.
19. The Appellant supplied the Assessment Reports to the individuals’ insurers or legal representatives for a marked-up fee.
20. By type of Assessor, the Appellant’s sales in respect of Assessment Reports in the 2010 and 2011 Periods were as follows:
Type of Assessor
2010 Period
2011 Period
Medical Practitioners
$134,239
$161,140
Nurse
NIL
$82,838
Practitioners
$1,030,934
$936,254
Other Assessors
$22,564
$60,544
Total
$1,187,737
$1,240,776
21. The Appellant’s sales in respect of Assessment Reports prepared by the Medical Practitioners included the following services, all of which were provided in the Medical Practitioner's offices and not in a facility operated by the Appellant:
Type of Service
2010 Period
2011 Period
Completion of OCF22
$1,912
$2,750
Completion of OCF18
$127
$740
Orthopaedic Assessment Report
$40,000
$4,600
Orthopaedic Re-Assessment Report
$2,300
NIL
Psychiatric Assessment Report
$31,500
$48,500
Physiatry Assessment Report
$16,600
$70,100
TMJ Assessment
NIL
$14,000
TMJ + OCF22 Preparation
$41,800
$20,000
Transportation
NIL
$450
Total
$134,239
$161,140
22. Redacted copies of the following invoices by the Appellant and the corresponding reports are located in the Joint Book of Documents:
(a) invoice no. 4000 in respect of, among other things, an Orthopaedic Assessment Report and the corresponding report dated November 13, 2009 by Joseph Kwok are located at tabs 4 and 5 of the Joint Book of Documents;
(b) invoice no. 3672 in respect of, among other things, a Psychiatric Assessment and the corresponding report dated September 8, 2009 by Jerry Cooper are located at tabs 6 and 7 of the Joint Book of Documents;
(c) invoice no. 41807 in respect of, among other things, a Physiatry Assessment and the corresponding report dated August 11, 2010 by Joseph Wong are located at tabs 8 and 9 of the Joint Book of Documents; and
(d) invoice no. 42250 in respect of, among other things, a T.M.J. Assessment and the corresponding report dated December 10, 2010 by Alex Pister are located at tabs 10 and 11 of the Joint Book of Documents.
23. The Appellant’s sales in respect of Assessment Reports prepared by the Nurse included the following services that were provided in a facility operated by the Appellant:
Type of Service
2011 Period
Completion of OCF22
$70
Completion of OCF18
$70
Attendant Care Needs (form 1)
$3,824
Attendant Care Needs Assessment
$45,780
Attendant Care Needs Re-Assessment
$11,360
Second Re-Attendant Care Needs Assessment
$860
Re-assessment of Attendant Care Needs III
$1,000
Total
$62,964
24. The Appellant’s sales in respect of Assessment Reports prepared by the Nurse included the following services that were not provided in a facility operated by the Appellant:
Type of Service
2011 Period
Ergonomic Intervention
$1,000
Home Site Assessment Report
$13,200
Follow-Up Home Site Assessment Report
$1,000
Third Follow Up Home Site Assessment Report
$1,000
Work Site Survey
$1,000
Attendant Care Needs (Form 1)
$127
Attendant Care Needs Assessment
$2,000
Mileage
$152
Travel Time
$395
Total
$19,874
25. The Appellant’s sales in respect of Assessment Reports prepared by the Practitioners included the following services that [sic] provided in a facility operated by the Appellant:
Type of Service
2010 Period
2011 Period
Completion of OCF22
$33,198
$25,978
Completion of OCF18
$4,269
$44,629
Combined Functional Capacity Assessment
$190,550
$149,350
Combined Functional Capacity Re-Assessment
NIL
$3,675
Attendant Care Needs (form 1)
$5,990
$7,519
Attendant Care Needs Assessment
$61,400
$67,300
Attendant Care Needs Re-Assessment
$760
$20,620
Activity and Physical Mobility (A.P.M.)
$20,000
$12,200
Testing/Scoring/Interpretation
$70,511
$46,226
Consultation w/ Client
$70,930
$47,309
Treatment Planning
$105,555
$66,152
Report Preparation
$116,332
$80,679
Disability Certificate Assessment
$180
NIL
Disability Certificate (OCF3)
$64
NIL
Treatment Plan (OCF18)
$191
$757
Psychological Assessment Report
$8,750
$2,188
Transportation
$600
$780
T.M.J. Assessment + OCF22 Preparation
$2,000
$2,000
Vocational Assessment
NIL
$3,900
Rebuttal in paper
$23,400
$25,200
Total
$714,680
$606,462
26. Redacted copies of the following invoices by the Appellant and the corresponding reports are located in the Joint Book of Documents:
(a) invoice no. 42196 in respect of, among other things, a Combined Functional Capacity Assessment and the corresponding report dated August 23, 2010 by David Kunashko are located at tabs 12 and 13 of the Joint Book of Documents;
(b) invoice no. 41550 in respect of, among other things, “Testing/Scoring/Interpretation”, “Consultation w/ Client”, and “Treatment Planning”, and the corresponding report dated June 7, 2010 by Rakesh Ratti are located at tabs 14 and 15 of the Joint Book of Documents;
(c) invoice no. 3631 in respect of, among other things, “Psychological Assessment”, and the corresponding report dated September 14, 2009 by Knolly Hill are located at tabs 16 and 17 of the Joint Book of Documents; and
(d) invoice no. 3146 in respect of a Rebuttal in paper and the corresponding report dated May 4, 2009 by David Kunashko are located at tabs 18 and 19 of the Joint Book of Documents.
27. The Appellant’s sales in respect of Assessment Reports prepared by Practitioners included the following services that were not provided in a facility operated by the Appellant:
Type of Service
2010 Period
2011 Period
Home Site Assessment Report
$126,963
$88,147
Follow-up home site assessment
$68,509
$88,529
Second Follow-Up Home Site Assessment
$6,449
$26,000
Third Follow Up Home Site Assessment
NIL
$4,000
Exercise Regimen
NIL
$3,268
In-Home Exercise Regimen
NIL
$5,188
Second In-Home Exercise Regimen
NIL
$2,700
Work Site Assessment
$15,500
$16,870
Graduated Return to Work Programme
NIL
$2,486
Ergonomic Assessment
$1,278
$10,000
Attendant Care Needs (Form 1)
$6,629
$1,848
Attendant Care Needs Assessment
$7,640
NIL
Mileage
$1,399
$1,140
Travel Time
$3,739
$3,630
Rebuttal in person
$58,125
$24,025
Educational Session
$20,025
$43,761
Second Educational Session
NIL
$4,950
Total Body Assessment
NIL
$612
Provide Pt w/ Recommendations
NIL
$1,319
File and Medical Doc. Review
NIL
$1,319
Total
$316,256
$329,792
[Number 28 is missing in the partial Agreed Statement of Facts.]
29. Redacted copies of the following invoices by the Appellant and the corresponding reports are located in the Joint Book of Documents:
(a) invoice no. 41791 in respect of, among other things, “Home Site Assessment”, and the corresponding report dated August 17, 2010 by Sandy Pister are located at tabs 20 and 21 of the Joint Book of Documents;
(b) invoice no. 3105 in respect of, among other things, “Follow-Up Home Site Assessment Report”, “Attendant Care Needs (Form 1)”, “Attendant Care Needs Assessment”, “Travel Time” and “Mileage”, and the corresponding report dated April 8, 2009 by Saeid Gholeizadeh are located at tabs 22 and 23 of the Joint Book of Documents;
(c) invoice no. 3733 in respect of, among other things, “Follow-Up Home Site Assessment Report”, and the corresponding report dated August 22, 2009 are located at tabs 24 and 25 of the Joint Book of Documents;
(d) invoice no. 41908 in respect of, among other things, “Work Site Survey Report”, and the corresponding report dated August 30, 2010 by Sandy Pister are located at tabs 26 and 27 of the Joint Book of Documents;
(e) invoice no. 4327 in respect of, among other things, “Ergonomic Assessment”, and the corresponding report dated February 24, 2010 by Sandy Pister are located at tabs 28 and 29 of the Joint Book of Documents;
(f) invoice no. 41686 in respect of, among other things, “Ergonomic Assessment”, and the corresponding report dated July 15, 2010 by Sandy Pister are located at tabs 30 and 31 of the Joint Book of Documents;
(g) invoice no. 42425 in respect of, among other things, “In-Home Exercise Regimen” and the corresponding report rated January 9, 2011 by Sandy Pister are located at tabs 32 and 33 of the Joint Book of Documents;
(h) invoice no. 42354 in respect of, among other things, “Report Preparation”, “In-Home Exercise Regimen”, “File and Medical Doc. Review”, “Provide Pt w/ Recommendation”, and “Total Body Assessment” and the corresponding report dated December 2, 2010 by Saeid Gholeizadeh are located at tabs 34 and 35 of the Joint Book of Documents;
(i) invoice no. 41760 in respect of "In Person Rebuttal" and the corresponding report dated July 29, 2010 by Sandy Pister are located at tabs 36 and 37 of the Joint Book of Documents; and
(j) invoice no. 3649 in respect of, among other things, “Educational Session” and the corresponding report dated November 23, 2009 by Sandy Pister are located at tabs 38 and 39 of the Joint Book of Documents.
30. The Appellant’s sales in respect of Assessment Reports prepared by the Other Assessors included the following services that were provided in a facility operated by the Appellant:
Type of Service
2010 Period
2011 Period
Completion of OCF22
$64
$1,044
Vocational Assessment
$22,500
$22,500
Total
$22,564
$23,544
31. Redacted copies of invoice no. 41605 in respect of, among other things, “Vocational Assessment”, and the corresponding report dated December 3, 2009 by Gurleen Minhas are located at tabs 40 and 41 of the Joint Book of Documents.
32. The Appellant’s sales in respect of Assessment Reports prepared by the Other Assessors included the following services that were not provided in a facility operated by the Appellant:
Type of Service
2010 Period
2011 Period
Driver Re-Integration Evaluation
NIL
$37,000
Total
NIL
$37,000
33. Redacted copies of invoice no. 42229 in respect of, among other things, “Driver Re-Integration Evaluation”, and the corresponding report dated November 24, 2010 by A. Davis are located at tabs 42 and 43 of the Joint Book of Documents.
34. The Appellant’s sales included the following amounts invoiced by the Appellant to Physiotherapy Wellness Institute Inc. in respect of psychological, chiropractic and physiotherapy treatments:
(a) $169,837 in the 2010 Period;
(b) $142,473 in the 2011 Period; and
(c) $295,615 in the 2012 Period.
35. Before 2010, the Appellant charged GST/HST on the supply of Assessment Reports.
36. The Appellant charged and collected HST in respect of Assessment Reports:
(a) in the amount of $348.28 in the 2011 Period; and
(b) in the amount of $66,279 in the 2012 Period.
[21] In these reasons, forms OCF-22 and OCF-18 will also be referred to as Form 22 and Form 18, respectively, and Assessment Reports will also be referred to as Report(s).
Vocan’s facility
[22] Vocan’s facility is located at Jane Street, Toronto. It consists of 1,200 square feet, with a front desk and three care rooms each containing a computer, a bed, a blood pressure instrument, reflex hammer, stethoscope, and a functional capacity room with the Arcon machine, treadmill and bicycle. Ms. Handy’s description of the facility was confirmed by Mr. Rabbaya. In cross-examination she acknowledged it had another location on Yonge Street, Toronto, and adjacent to each Vocan location was the Physiotherapy Wellness Institute (“PWI”), owned by her. Under an agreement, Vocan shared and subleased premises from PWI. Paragraph 34 of the agreed facts indicates that Vocan invoiced PWI in respect of psychological, chiropractic and physiotherapy treatments.
[23] Mr. Rabbaya grouped assessments into those conducted by specialists outside Vocan’s facility and those conducted by the rest of the assessors that he characterized as functional capacity evaluations, which included visits off-site, follow-up visits or vocational assessments. Testing conducted in a care room consists of range of motion, sitting, standing and squatting. The functional room contains objective diagnostic equipment, the Arcon, which accurately measures the individual’s physical tasks such as pushing, pulling and bending, thereby testing limitations. Most of the time, the case study room and designated offices are used to do the medical briefs, which sometimes are “paper briefs.” [5] He claimed that he observed daily the intake process and meetings with individuals and assessors in the care or examination rooms. However, during cross-examination he acknowledged that tests are done by assessors in closed examination rooms, he is not present and privacy is required in accordance with Vocan’s procedures.
[24] Combined, Mr. Gholeizadeh, Mr. Kunashko and Mr. Hill described the facility as having a large room with computers, assistants, case offices and functional and examination rooms equipped with equipment, as identified by Mr. Rabbaya. Mr. Gholeizadeh initially claimed that one of the “professional rooms” was dedicated to him, but during cross-examination he recanted that.
[25] Mr. Hill conducted psychological assessments at Vocan, including administering Beck testing and scoring same to ascertain the individual’s problems to make recommendations to assist the individual to return to normal functioning and rehabilitation, and discussed his Report and recommendations with the individual at Vocan. Unless it is an emergency situation, he typically recommends 12 therapy sessions. [6] In cross-examination, he agreed that between 2009 to February 2012, he also had a private practice at his own office.
[26] When Sukhvinder Gill, CRA auditor, attended Vocan’s facility for a meeting she briefly observed the care rooms containing equipment that included beds. [7]
Screening Process
[27] Upon receipt of a request from a referring source, Vocan makes the appointment with the individual and the assessor at Vocan’s facility for an activity and physical mobility screening (“screening”) unless it is done at the specialist’s facility. Ms. Handy continued that the purpose of screening or a “short assessment” is to ascertain the individual’s ability to do certain things to facilitate a “full-fledged” assessment; Mr. Rabbaya agreed with that and added it provides a clinical impression with treatment goals set out in Form 22, which is sent to the referring source for approval of an assessment. Next, she said Vocan waits for approval for an assessment from the referring source and Form 22 is then completed. She agreed in cross-examination it was necessary to first complete and send Form 22 to the insurer to seek approval. If approval is obtained, the insurer signs Form 22. Binderized medical information is obtained from doctors and lawyers, which Vocan had given to assessors at the outset.
[28] Mr. Rabbaya’s description of the process was clearer. Upon receipt of referrals from referring sources, Vocan’s intake coordinator arranged the appointments for both baseline screening and assessments (if approved) with the individual and the assessor or with the assessor’s office. Whether screening is at or outside Vocan’s facility, the individual’s history is obtained from the referring source, including insurance and medical information, and provided to the assessor with the area of expertise. Subjective functional testing, such as standing, sitting, and bending, is where the details of accident and injuries are collected. Objective functional testing can be included for more serious injuries by engaging the Arcon apparatus. He commented that Vocan’s job is to arrange for and seek funding from the referring source for approval for an assessment.
[29] During screening, Mr. Gholeizadeh obtained a list of injuries and ascertained limitations from a physiotherapy perspective, which he used to complete Form 22. Similarly, Mr. Kunashko ascertained if there is pain while performing activities of daily living (“ADL”), if there are problems at work, if devices are needed, and if further intervention is required; he viewed it as the “initial step” to seek approval for a functional abilities evaluation (assessment). Mr. Hill viewed screening as an “initial assessment”; he referred to information provided by Vocan (medical history, results of x-rays and family documentation), which assisted him with what he might propose in Form 22 and then signed and sent same to the referring source to seek approval for an assessment.
Application for Approval of an Assessment or Examination – Form 22
[30] Ms. Handy briefly touched on Parts 1 and 2 of Form 22. Part 4, the nature of assessment, and Part 5 being completed by an assessor. When asked in cross-examination about Part 5(a)(ii), she said she was unsure if this meant an individual had already been treated and was inclined to say the individual “could have”. If declined, even partially, by the insurer, she said the assessment might still proceed after discussions with the lawyer. Vocan would bill to the individual’s name and send it to the lawyer. She then stated that Mr. Rabbaya, responsible for billings, knows better than her. Mr. Rabbaya said Vocan goes back to individuals. Typically, the individual proceeds with the assessment as there is likely an ongoing legal dispute and the insurance company might later revisit the situation and pay.
[31] Contrary to Ms. Handy’s initial claim that Vocan had reviewed, completed and signed the Form 22s at its facility, Mr. Rabbaya presented a more accurate account. He said Vocan merely completed basic contact information (about the individual and insurer) in Parts 1 and 2. It also had the individual complete the Authorization for Release of Information form (“Authorization Form”). [8] Assessors were required by insurers to complete Parts 4 up to Part 8, consistent with their evidence and as reflected in paragraph 17 of the agreed facts.
[32] Each assessor gave an overview, albeit in some detail, about the general process to obtain approval for an assessment; in large part, this corroborated Mr. Rabbaya’s evidence on this aspect. Summarized, each assessor stated Vocan’s intake coordinator arranges or coordinates appointments with individuals and assessors or the assessor’s office for screening (and assessment). Parts 4 to 7 were completed by them during screening with information from individuals, who also signed Form 22 and any documents sent by Vocan which facilitated assessors’ recommendations for the proposed goods and services. Assessors said Vocan received the fee for completing Form 22, not them, and they submitted the Forms to insurance companies, on behalf of individuals, who may approve, wholly or partially, or decline the recommendations. The Assessors’ evidence conflicts with Ms. Handy’s evidence in that she had suggested in re-examination that Part 7 of Form 22 was completed on Vocan’s behalf, but as she acknowledged in cross-examination, Form 22 pertains to the individual.
[33] I observe that completion of the more substantive Parts, 3 to 7, pertain to assessor functions who are required to complete and sign same. Part 5 requires Provisional Clinical Information, a description of the complaint, if treatment had previously been provided, details of the proposed assessment, a rationale and whether the assessor is aware of a prior assessment of the type being proposed in Form 22. Mr. Gholeizadeh said insurers required him to go through every Part, which he explained and discussed with the individual plus the benefits before he faxed the Form to the insurance company for approval. Also, Part 8 requires the insurer to sign, whether approval is granted or not for the assessment. If approved, the insurer is required to notify the assessor and the individual. If declined, it is to advise the individual that it is not agreeing to pay for same thus an examination is required.
Invoices
[34] Once signed by an assessor, the report is sent to Vocan. The assessor billed for the assessment report. Vocan then bills and supplies the report to the referring source setting out charges for services, completion of Form 22 and the assessor’s report. In re-examination, Ms. Handy said Vocan had referred individuals to Dr. Kwok and pointed to an invoice that Vocan sent to the referring source reflecting charges for both services and confirmed that he had received a flat fee separately for the Report from Vocan for a lesser amount. Mr. Rabbaya agreed and said usually Vocan’s invoices itemize two services on two dates showing charges for both services paid to or receivable by Vocan from the referring source. He added that the assessor is not paid the $63.72 for completion of Form 22. Mr. Hill corroborated that and confirmed that Vocan paid him a fixed fee for a lesser amount for his Reports.
[35] When Ms. Handy was asked if screening would be charged and would be on the invoice, it was suggested it was part of the standard part of the intake process. She believed screening was done for everyone but does not know if Vocan charged for screening. Mr. Rabbaya indicated it is “not all the time” that screening is billed for any type of assessment. Although screening is administered to every individual at Vocan, it is not always billed. For example, after the first assessment, if Vocan needs to do another baseline screening it would not bill for it. Both of them agreed that these cannot be charged to OHIP given the purpose was for insurance benefits.
[36] Mr. Rabbaya discussed four other Vocan invoices subject to the same billing process, each of which itemizes charges for both services. He highlighted all the details from the invoices which I have summarized as follows: [9]
Completion of Forms
$
Reports
$
September 1, 2009
63.72
September 8, 2009
3,500
May 10, 2010
70
August 11, 2010
2,300
November 3, 2010
200
December 10, 2010
2,000
May 20, 2010
70
August 23, 2010
1,225
Treatment and Assessment Plan – Form 18
[37] Unlike Form 22, Form 18 was not completed for every individual. If an assessor wanted to see the individual again for another type of treatment or an assisted device was needed, Vocan would follow up and seek approval for other services or goods recommended and completed Form 18, which Mr. Rabbaya said resulted in additional revenue for Vocan. [10] Part 4 refers to the assessor’s “clinical impression” through examination and medical documentation and is signed by the health practitioner. Part 5 lists regulated health care professionals for which he reviews credentials when hiring assessors; he thinks all professionals listed are regulated but is unsure about social workers. Part 6 includes the assessor’s diagnosis of the injury with findings of physical and psychological symptoms. Part 7 requires information about the individual’s prior and concurrent conditions. Part 8 requires the assessor to describe the individual’s impairment and how these affect their employment. Part 9 is rehabilitative and establishes goals for pain reduction and increase in strength and range of motion.
[38] The respondent conceded the fees Vocan billed to and received from referring sources for completion of Forms 18 and 22 belong to Vocan and the amounts Vocan had paid to the assessors for the Reports were less than the amounts Vocan billed to referring sources.
IV. PARTIES’ POSITIONS
[39] As pled, Vocan’s position is it is a health care facility within the meaning of section 1 of Part II of Schedule V of the ETA, and all assessors render medical care and supplies to its patients. Hence, “the words medical care should not be limited only to physicians but to include other health care professionals/practitioners such as nurses, chiropractors, occupational therapists, physiotherapists and psychologists etc. who are all capable to render what is required to diagnose, treat and/or prevent disease, injuries or other illnesses as permitted in the Ontario Regulated Health Professionals Act.” [11] The “health care professionals who render the services to the patients of VOCAN at its facility are governed by their respective statutes in the Regulated Health Professional’s Act, to provide medical care.” [12]
[40] Under section 1, Part II, Schedule V, “practitioners” are defined and are not required to charge GST/HST in respect to supplies of health care services listed in sections 7 and 7.1 of Part II of Schedule V. [13] Services rendered by assessors are exempt from HST under those sections and sections 2, 5, 6, 9, 10. [14] Accordingly, “…medical services can be provided by other health care providers and not only medical doctors”. [15]
[41] At the hearing, Vocan’s position is that the supply of Reports, during both Periods, is an exempt supply under section 2 of Part II of Schedule V. It is a health care facility that provides medical care rendered by assessors who fall within the health professions specified in Schedule 1 of the RHPA to individuals as patients of its facility; individuals seek benefits and treatment to deal with chronic pain. Other Assessors, not governed by the RHPA, are equally qualified professionals and provide medical care. Therefore, its supply of Reports to referring sources constitutes medical care. As such, no HST was charged on the value of consideration and penalties were improperly levied.
[42] The respondent’s position is that every supply of Reports by Vocan—regardless of the type of assessor—fails one or more of the section 2 tests of Part II of Schedule V. It did not provide an “institutional health care service”, it did not operate a “health care facility”, as defined in Section 1 of Part II of Schedule V, and individuals were not patients of its facility. Therefore, such supply is taxable and Vocan is liable for unreported HST collectible for both Periods and associated penalties, as assessed. Contrary to Vocan’s submissions, the respondent argues there is no evidence that assessors were agents of Vocan, nor is it entitled to additional ITC’s.
[43] Unless otherwise specified, all references to provisions that follow are to the ETA.
V. LAW
[44] Goods and Services Tax is imposed on every recipient of a taxable supply made in Canada, in respect of the supply, calculated at the applicable rate on the value of the consideration for the supply. [16] Ontario harmonized its sales tax with the Goods and Services Tax (collectively “HST”).
[45] By virtue of subsection 123(1), a “taxable supply” means a supply made in the course of a commercial activity. A “supply” is broadly defined to mean the provision of “property” or “services” in any manner. Therefore anything provided in the course of a commercial activity will conceivably be subject to HST.
[46] The term “exempt supply” means a supply included in Schedule V.
[47] Before turning to the first issue as to whether the supply of Reports is taxable or exempt, I will address Vocan’s submission that assessors are its agents.
Agency
[48] When asked in cross-examination about his testimony describing Dr. Cooper as Vocan’s agent, Mr. Rabbaya responded he lacks legal training, it is not a legal conclusion and he was unaware of any agency agreement. [17] Ms. Handy commented in re-examination that all assessors were Vocan’s agents because assessors billed Vocan, and Vocan then billed the insurance company. No written agency agreement was produced at the hearing.
[49] It is only where there is no written agreement that the conduct of the parties must be examined for the purpose of determining whether there was an implied agency. [18]
[50] Some general principles governing key features of an agency relationship would be useful at this point. In Kinguk Trawl Inc. v The Queen (“Kinguk”) [19] , the Federal Court of Appeal adopted the definition of the term “agency” as “…a fiduciary relationship which exists between two persons, one of whom expressly or impliedly consents that the other should act on his behalf so as to affect his relations with third parties, and the other of whom similarly consents so to act or so acts.” [20]
[51] The Court also adopted the “essential ingredients” of an agency relationship consisting of:
a) consent of principal and agent;
b) authority of the agent