Canada v. Cheema

Canada v. Cheema
Court (s) Database
Federal Court of Appeal Decisions
Date
2018-02-27
Neutral citation
2018 FCA 45
File numbers
A-447-16
Notes
Reported Decision A correction was made on August 8, 2019
Decision Content
Date: 20180227
Docket: A-447-16
Citation: 2018 FCA 45
CORAM:
NADON J.A.
STRATAS J.A.
WEBB J.A.
BETWEEN:
HER MAJESTY THE QUEEN
Appellant
and
MOHAMMAD N. CHEEMA
Respondent
Heard at Toronto, Ontario, on September 20, 2017.
Judgment delivered at Ottawa, Ontario, on February 27, 2018.
REASONS FOR JUDGMENT BY:
STRATAS J.A.
CONCURRED IN BY:
NADON J.A.
DISSENTING REASONS BY:
WEBB J.A.
Date: 20180227
Docket: A-447-16
Citation: 2018 FCA 45
CORAM:
NADON J.A.
STRATAS J.A.
WEBB J.A.
BETWEEN:
HER MAJESTY THE QUEEN
Appellant
and
MOHAMMAD N. CHEEMA
Respondent
REASONS FOR JUDGMENT
WEBB J.A. (Dissenting reasons)
[1] This appeal relates to the conditions that must be satisfied in order to obtain the new housing rebate under the Excise Tax Act, R.S.C. 1985, c. E-15 (ETA) and the New Harmonized Value-added Tax System Regulations, No. 2, SOR/2010-151 (the Regulations). In particular, the issue is whether a person who signs an agreement of purchase and sale for a single unit residential complex solely for the purpose of assisting another person in obtaining the mortgage that will be required to purchase that complex and who does not acquire a beneficial interest in that complex, must satisfy the occupancy requirements of subsection 254(2) of the ETA.
[2] The Minister of National Revenue reassessed Mr. Cheema to deny him the new housing rebate on the basis that Dr. Akbari, who is not related to Mr. Cheema and who signed the agreement of purchase and sale, did not intend to occupy the residential complex. The Tax Court determined (2016 TCC 251) that, in this case, Mr. Cheema qualified for the rebate and allowed Mr. Cheema’s appeal from that reassessment. For the reasons that follow, I would dismiss this appeal.
I. Background
[3] On March 26, 2012, Mr. Cheema and his friend, Dr. Akbari, signed an agreement of purchase and sale that was accepted by Mosaik Pinewest Inc., the builder, on the following day. The agreement provided for the construction of a house, identified by the name of the particular model, on a specified lot in Vaughan, Ontario. The civic address had not yet been assigned. Therefore, it is a logical inference that when the agreement of purchase and sale was signed the house did not exist. The purchase price for the house was in excess of $800,000.
[4] The house was for Mr. Cheema and his family. Dr. Akbari signed the agreement of purchase and sale to assist Mr. Cheema in obtaining mortgage financing. The Tax Court Judge accepted the testimony of Mr. Cheema that from the beginning it was understood that Dr. Akbari would not have any real interest in the property (paragraph 8 of his reasons). He also accepted the testimony of Dr. Akbari that he did not pay any part of the purchase price for the house nor did he pay for any of the ongoing expenses related to the house. Mr. Cheema paid all of the amounts related to the purchase and ongoing maintenance of the house (paragraph 9 of his reasons). It is also clear that Dr. Akbari never intended to occupy the house as his primary residence.
[5] At the closing of the purchase and sale of the house on July 26, 2013, Mr. Cheema and his spouse acquired a 99% interest in the house and Dr. Akbari acquired a 1% interest. On the same day, Dr. Akbari signed a trust declaration acknowledging that he was holding this 1% interest in trust for Mr. Cheema and his spouse.
[6] This trust declaration was not provided to the mortgage lender and the Tax Court Judge found that it was probably not provided to the builder.
[7] Dr. Akbari later transferred his 1% interest to Mr. Cheema’s son, who had been approved by the mortgagee (paragraph 16 of the reasons of the Tax Court Judge).
[8] Mr. Cheema and his spouse moved into the house as their primary place of residence immediately following the closing on July 26, 2013.
II. Relevant Statutory Provisions
[9] The new housing rebate for Ontario is payable under section 256.21 of the ETA and the Regulations. Subsections 41(1) and (2) of the Regulations provide that:
41(1) In this section, relation and single unit residential complex have the same meanings as in subsection 254(1) of the Act.
41(1) Au présent article, immeuble d’habitation à logement unique et proche s’entendent au sens du paragraphe 254(1) de la Loi.
(2) If an individual is entitled to claim a rebate under subsection 254(2) of the Act in respect of a residential complex that is a single unit residential complex, or a residential condominium unit, acquired for use in Ontario as the primary place of residence of the individual or of a relation of the individual, or the individual would be so entitled if the total consideration (within the meaning of paragraph 254(2)(c) of the Act) in respect of the complex were less than $450,000, for the purposes of subsection 256.21(1) of the Act, the individual is a prescribed person and the amount of a rebate in respect of the complex under that subsection is equal to the lesser of $24,000 and the amount determined by the formula
(2) Dans le cas où un particulier a droit au remboursement prévu au paragraphe 254(2) de la Loi au titre d’un immeuble d’habitation qui est un immeuble d’habitation à logement unique ou un logement en copropriété acquis en vue de servir en Ontario de résidence habituelle du particulier ou de son proche ou aurait droit à ce remboursement si la contrepartie totale, au sens de l’alinéa 254(2)c) de la Loi, relative à l’immeuble était inférieure à 450 000 $, pour l’application du paragraphe 256.21(1) de la Loi, le particulier est une personne visée et le montant du remboursement versé au titre de l’immeuble selon ce paragraphe est égal au montant obtenu par la formule suivante, jusqu’à concurrence de 24 000 $ :
A × B
A × B
Where
où :
A is 75%; and
A représente 75 %;
B is the total of all tax under subsection 165(2) of the Act paid in respect of the supply of the complex to the individual or in respect of any other supply to the individual of an interest in the complex.
B le total de la taxe payée en vertu du paragraphe 165(2) de la Loi relativement à la fourniture de l’immeuble au profit du particulier ou relativement à toute autre fourniture, effectuée au profit de celui-ci, d’un droit sur l’immeuble.
[10] In essence, the Regulations provide for a rebate of a portion of the tax paid under subsection 165(2) of the ETA. The conditions that must be satisfied to qualify for this rebate are the same conditions that are applicable for determining when a new housing rebate will be payable under subsection 254(2) of the ETA, except that, for a residential complex in Ontario, the rebate, capped at $24,000, will be payable regardless of the cost of the house.
[11] The general conditions for a new housing rebate (other than the conditions related to the consideration for the residential complex and the calculation of the rebate) are set out in subsection 254(2) of the ETA:
(2) Where
(2) Le ministre verse un remboursement à un particulier dans le cas où, à la fois :
(a) a builder of a single unit residential complex or a residential condominium unit makes a taxable supply by way of sale of the complex or unit to a particular individual,
a) le constructeur d’un immeuble d’habitation à logement unique ou d’un logement en copropriété en effectue, par vente, la fourniture taxable au profit du particulier;
(b) at the time the particular individual becomes liable or assumes liability under an agreement of purchase and sale of the complex or unit entered into between the builder and the particular individual, the particular individual is acquiring the complex or unit for use as the primary place of residence of the particular individual or a relation of the particular individual,
b) au moment où le particulier devient responsable ou assume une responsabilité aux termes du contrat de vente de l’immeuble ou du logement conclu entre le constructeur et le particulier, celui-ci acquiert l’immeuble ou le logement pour qu’il lui serve de lieu de résidence habituelle ou serve ainsi à son proche;
[…]
[…]
(d) the particular individual has paid all of the tax under Division II payable in respect of the supply of the complex or unit and in respect of any other supply to the individual of an interest in the complex or unit (the total of which tax under subsection 165(1) is referred to in this subsection as the “total tax paid by the particular individual”),
d) le particulier a payé la totalité de la taxe prévue à la section II relativement à la fourniture et à toute autre fourniture, effectuée à son profit, d’un droit sur l’immeuble ou le logement (le total de cette taxe prévue au paragraphe 165(1) étant appelé « total de la taxe payée par le particulier » au présent paragraphe);
(e) ownership of the complex or unit is transferred to the particular individual after the construction or substantial renovation thereof is substantially completed,
e) la propriété de l’immeuble ou du logement est transférée au particulier une fois la construction ou les rénovations majeures de ceux-ci achevées en grande partie;
(f) after the construction or substantial renovation is substantially completed and before possession of the complex or unit is given to the particular individual under the agreement of purchase and sale of the complex or unit
f) entre le moment où les travaux sont achevés en grande partie et celui où la possession de l’immeuble ou du logement est transférée au particulier en vertu du contrat de vente :
(i) in the case of a single unit residential complex, the complex was not occupied by any individual as a place of residence or lodging, and
(i) l’immeuble n’a pas été occupé à titre résidentiel ou d’hébergement,
(ii) in the case of a residential condominium unit, the unit was not occupied by an individual as a place of residence or lodging unless, throughout the time the complex or unit was so occupied, it was occupied as a place of residence by an individual, or a relation of an individual, who was at the time of that occupancy a purchaser of the unit under an agreement of purchase and sale of the unit, and
(ii) le logement n’a pas été occupé à titre résidentiel ou d’hébergement, sauf s’il a été occupé à titre résidentiel par le particulier, ou son proche, qui était alors l’acheteur du logement aux termes d’un contrat de vente;
(g) either
g) selon le cas :
(i) the first individual to occupy the complex or unit as a place of residence at any time after substantial completion of the construction or renovation is
(i) le premier particulier à occuper l’immeuble ou le logement à titre résidentiel, à un moment après que les travaux sont achevés en grande partie, est :
(A) in the case of a single unit residential complex, the particular individual or a relation of the particular individual, and
(A) dans le cas de l’immeuble, le particulier ou son proche,
(B) in the case of a residential condominium unit, an individual, or a relation of an individual, who was at that time a purchaser of the unit under an agreement of purchase and sale of the unit, or
(B) dans le cas du logement, le particulier, ou son proche, qui, à ce moment, en était l’acheteur aux termes d’un contrat de vente,
(ii) the particular individual makes an exempt supply by way of sale of the complex or unit and ownership thereof is transferred to the recipient of the supply before the complex or unit is occupied by any individual as a place of residence or lodging,
(ii) le particulier effectue par vente une fourniture exonérée de l’immeuble ou du logement, et la propriété de l’un ou l’autre est transférée à l’acquéreur de cette fourniture avant que l’immeuble ou le logement n’ait été occupé à titre résidentiel ou d’hébergement.
[…]
[…]
III. Decision of the Tax Court
[12] The Tax Court Judge noted that there are decisions of that Court that deny the new housing rebate when an unrelated person has signed the agreement of purchase and sale to assist someone in obtaining financing to buy the house. However, in this case, he found that Dr. Akbari was a bare trustee (paragraph 55 of his reasons) and that he had “no interest per se in the Property itself” (paragraph 53 of his reasons). Therefore, even though Dr. Akbari had “assumed a certain risk by signing the Agreement of Purchase and Sale and the mortgage” (paragraph 50 of his reasons), Dr. Akbari was not a “particular individual” for the purposes of subsection 254(2) of the ETA and Mr. Cheema qualified for the new housing rebate.
IV. Standard of Review
[13] The standard of review for any question of law is correctness and for any finding of fact (or question of mixed fact and law without an extricable legal question) is palpable and overriding error (Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235).
V. Analysis
[14] Under the ETA, tax is generally payable when a person acquires a new house. The ETA also provides that, subject to certain conditions, the purchaser of a new house is entitled to a rebate of a portion of the tax paid. The general rebate conditions in subsection 254(2) of the ETA provide for a rebate of a portion of the tax paid under subsection 165(1) of the ETA. This rebate will only be paid if the total consideration payable for the house (excluding any GST or HST – paragraph 154(2)(a) of the ETA) is less than $450,000. For a new house acquired in Ontario, the Regulations provide for a separate rebate of a portion of the tax paid under subsection 165(2) of the ETA. For this rebate there is no restriction on the amount of the consideration payable for the house but the rebate amount is limited to the lesser of $24,000 and 75% of the tax paid under subsection 165(2) of the ETA (subsection 41(2) of the Regulations). The tax rate imposed under subsection 165(2) of the ETA for Ontario is 8% (Schedule VIII of the ETA). Therefore, the maximum rebate of $24,000 for Ontario in relation to tax paid under subsection 165(2) of the ETA is payable for houses that cost $400,000 or more.
[15] The Tax Court Judge referred to the statement of the Department of Finance in the Goods and Services Tax: Explanatory Notes to Bill C-62 as passed by the House of Commons on April 10, 1990, (May 1990) at p. 124 (Explanatory Notes) related to the new housing rebate under subsection 254(2) of the ETA. The Explanatory Notes stated that “[t]he rebate seeks to ensure that the GST does not pose a barrier to affordable housing by effectively lowering the tax rate on most newly-constructed homes to 4 1/2 per cent – a level roughly equivalent to the existing average rate of tax embodied in new house prices.” Since the rebate payable under the Regulations is in relation to the additional tax imposed on new housing when Ontario harmonized its sales tax with the GST, it would seem logical that the same purpose can be inferred for the rebate payable under the Regulations – to effectively lower the tax rate on newly-constructed homes to ensure that the HST does not impose a barrier to affordable housing.
[16] The Regulations, which provide the rebate for new homes in Ontario, incorporate the occupancy requirements contained in paragraphs 254(2)(b) and (g) of the ETA. Paragraph 254(2)(b) of the ETA provides that when a particular individual becomes liable under the agreement of purchase and sale made with the builder, that individual must be acquiring the residential complex as his or her primary place of residence or as the primary place of residence of a relation of that individual. Paragraph 254(2)(g) of the ETA provides that, subject to certain exceptions, the particular individual (or a relation of that individual) must be the first person to occupy the residential complex as a place of residence after it is substantially completed.
[17] Because the particular individual is the person who must satisfy the occupancy requirements, it is critical to determine who, in any particular case, will be a particular individual. As noted by the Crown, if there is more than one particular individual, all of those individuals as a group will have to satisfy the occupancy requirements (subsection 262(3) of the ETA, section 40 of the Regulations).
[18] Paragraph 254(2)(a) of the ETA provides that the first condition that must be satisfied is that “a builder of a single unit residential complex or a residential condominium unit makes a taxable supply by way of sale of the complex or unit to a particular individual”. Therefore, this paragraph essentially provides that a “particular individual” is an individual to whom “a builder of a single unit residential complex or a residential condominium unit makes a taxable supply by way of sale of the complex or unit”.
[19] It was the position of the Crown at the hearing of the appeal that any individual who signs an agreement of purchase and sale (and as a result has a liability under that agreement) will be a “particular individual” and therefore, must satisfy the occupancy requirements of paragraphs 254(2)(b) and (g) of the ETA regardless of whether that individual acquires an interest in the residential complex. Therefore, an unrelated individual who signs an agreement of purchase and sale as a guarantor solely to assist another individual in acquiring a residential complex (and obtaining the necessary financing) would, in the Crown’s view, have to satisfy the occupancy requirements of subsection 254(2) of the ETA. The Crown submits that failing to do so would result in a denial of the new housing rebate to that other person.
[20] The net effect of the Crown’s interpretation is that an individual, who has sufficient assets to be able to buy a new house without a mortgage or has sufficient income to obtain a mortgage without a co-signor, will qualify for the new housing rebate, assuming the other conditions are satisfied. However, an individual who is unable to afford a new house on their own and who needs a second unrelated person to guarantee the payment of the purchase price, will be denied the new housing rebate. This would appear to deny the new housing rebate to those who need it the most and would raise the question of whether this was the intent of Parliament.
[21] The issue in this appeal is the interpretation of “particular individual” for the purposes of subsection 254(2) of the ETA. The Supreme Court of Canada has set out the approach to be used in interpreting provisions such as the ones in issue in this appeal in Canada Trustco Mortgage Co. v. The Queen, 2005 SCC 54, [2005] 2 S.C.R. 601 at paragraph 10:
10 It has been long established as a matter of statutory interpretation that "the words of an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament": see 65302 British Columbia Ltd. v. Canada, [1999] 3 S.C.R. 804, at para. 50. The interpretation of a statutory provision must be made according to a textual, contextual and purposive analysis to find a meaning that is harmonious with the Act as a whole. When the words of a provision are precise and unequivocal, the ordinary meaning of the words play a dominant role in the interpretive process. On the other hand, where the words can support more than one reasonable meaning, the ordinary meaning of the words plays a lesser role. The relative effects of ordinary meaning, context and purpose on the interpretive process may vary, but in all cases the court must seek to read the provisions of an Act as a harmonious whole.
[22] Therefore, based on the text, context and purpose of subsection 254(2) of the ETA, the question is whether a person who signs an agreement of purchase and sale (and thereby becomes liable under that agreement) solely to assist another individual in obtaining financing and who does not acquire any beneficial interest in the residential complex is a “particular individual” for the purposes of subsection 254(2) of the ETA.
[23] As noted by the Tax Court Judge there have been a number of decisions of the Tax Court in which individuals were denied the new housing rebate because another unrelated person, who did not intend to occupy the house, had signed the agreement of purchase and sale (Davidson v. The Queen, 2001-985 (GST)I, [2002] G.S.T.C. 25; Goyer v. The Queen, 2010 TCC 511, [2010] G.S.T.C. 163; Sharp v. the Queen, 2014 TCC 323, [2014] G.S.T.C. 135; Al-Hossain v. The Queen, 2014 TCC 379, [2014] G.S.T.C. 157; Henao v. The Queen, 2015 TCC 81, [2015] G.S.T.C. 40 and Malik v. The Queen, 2015 TCC 83, [2015] G.S.T.C. 51). Generally, in these cases the second person signed the agreement to enable the first person to obtain the financing to purchase the house. All of these cases were decided under the Informal Procedure. None of these decisions provide any detailed consideration of the text, context and purpose of the relevant provisions and it is difficult to reconcile these decisions.
[24] However, in Javaid v. The Queen, 2015 TCC 94, [2015] G.S.T.C. 53, Justice Woods held that an agent who signed an agreement of purchase and sale but who backed out of the deal before the closing was not a “particular individual” for the purposes of subsection 254(2) of the ETA and therefore did not have to satisfy the occupancy requirements of this subsection.
A. Paragraph 254(2)(b) of the ETA
[25] As support for the position of the Crown that any person who signs an agreement of purchase and sale will be a “particular individual”, the Crown, in her memorandum, appears to rely on paragraph 254(2)(b) of the ETA.
[26] However, the opening words of paragraph 254(2)(b) of the ETA are:
at the time the particular individual becomes liable or assumes liability under an agreement of purchase and sale of the complex or unit entered into between the builder and the particular individual, […]
This paragraph only applies if a person is a particular individual – it does not make a person a particular individual. Whether a person is a particular individual is to be determined based on the wording of paragraph 254(2)(a) of the ETA, which provides that a particular individual is an individual to whom a builder has made a taxable supply by way of sale of a residential complex.
[27] It could be argued that it is implicit in paragraph 254(2)(b) of the ETA that, in addition to the requirement of paragraph 254(2)(a) of the ETA (that the residential complex is sold to the person), a particular individual is one who also has entered into an agreement of purchase and sale for the residential complex. However, even if an individual can only be a particular individual if that individual has entered into the agreement of purchase and sale for the residential complex, it does not necessarily follow that each person who enters into that agreement will be a particular individual.
B. Subsection 262(3) of the ETA and Section 40 of the Regulations
[28] The Crown, in her memorandum, also referred to subsection 262(3) of the ETA as support for her position that each person who is liable under the agreement of purchase and sale must satisfy the occupancy conditions of paragraphs 254(2)(b) and (g) of the ETA.
[29] Subsection 262(3) of the ETA provides that:
(3) If
(a) a supply of a residential complex or a share of the capital stock of a cooperative housing corporation is made to two or more individuals, or
(b) two or more individuals construct or substantially renovate, or engage another person to construct or substantially renovate, a residential complex,
the references in sections 254 to 256 to a particular individual shall be read as references to all of those individuals as a group, but only one of those individuals may apply for the rebate under section 254, 254.1, 255 or 256, as the case may be, in respect of the complex or share.
(3) Lorsque la fourniture d’un immeuble d’habitation ou d’une part du capital social d’une coopérative d’habitation est effectuée au profit de plusieurs particuliers ou que plusieurs particuliers construisent ou font construire un immeuble d’habitation, ou y font ou font faire des rénovations majeures, la mention d’un particulier aux articles 254 à 256 vaut mention de l’ensemble de ces particuliers en tant que groupe. Toutefois, seulement l’un d’entre eux peut demander le remboursement en application des articles 254, 254.1, 255 ou 256 relativement à l’immeuble ou à la part.
[30] However, since Mr. Cheema was applying for a rebate under section 256.21 of the ETA and not subsection 254(2) of the ETA, as noted by Justice Woods in Javaid, the reference should have been to section 40 of the Regulations:
40 If a supply of a residential complex or a share of the capital stock of a cooperative housing corporation is made to two or more individuals, or two or more individuals construct or substantially renovate, or engage another person to construct or substantially renovate, a residential complex, the references in sections 41, 43, 45 and 46 and the references in section 256.21 of the Act to an individual are to be read as references to all of those individuals as a group, but only one of those individuals may apply for a rebate under subsection 256.21(1) of the Act in respect of the complex or share, the amount of which is determined under section 41, 43, 45 or 46.
40 Si la fourniture d’un immeuble d’habitation ou d’une part du capital social d’une coopérative d’habitation est effectuée au profit de plusieurs particuliers ou que plusieurs particuliers construisent ou font construire un immeuble d’habitation ou y font ou y font faire des rénovations majeures, la mention d’un particulier aux articles 41, 43, 45 et 46 ainsi qu’à l’article 256.21 de la Loi vaut mention de l’ensemble de ces particuliers en tant que groupe. Toutefois, seulement l’un d’entre eux peut demander un remboursement en application du paragraphe 256.21(1) de la Loi relativement à l’immeuble ou à la part, dont le montant est déterminé selon les articles 41, 43, 45 ou 46.
[31] This provision also provides that if a supply of a residential complex is made to two or more individuals, all of those individuals, as a group, must satisfy the requirements of section 41 of the Regulations and subsection 254(2) of the ETA. Subsection 41(2) of the Regulations provides that it applies to individuals who are entitled to a rebate under subsection 254(2) of the ETA. In my view, in applying section 40 of the Regulations to the occupancy requirements of subsection 254(2) of the ETA, the result would be that only those individuals who are particular individuals in relation to the acquisition of a specific residential complex would have to satisfy these occupancy requirements. The first question that must be addressed is whether an individual is a particular individual. Only once the particular individuals have been identified would it be necessary to determine if those particular individuals (if there is more than one particular individual), as a group, satisfy the occupancy requirements of paragraphs 254(2)(b) and (g) of the ETA as these provisions refer specifically to the “particular individual”. As a result the determination of whether an individual is a particular individual (and hence how many particular individuals there are) is done before section 40 is applied.
C. Definition of “recipient” in section 123 of the ETA
[32] In some of the cases referred to in paragraph 23 above, the Tax Court Judges referred to the definition of “recipient” in section 123 of the ETA to expand what would otherwise be contemplated by the words of paragraph 254(2)(a) of the ETA. “Recipient” is defined in section 123 of the ETA as:
recipient of a supply of property or a service means
acquéreur
(a) where consideration for the supply is payable under an agreement for the supply, the person who is liable under the agreement to pay that consideration,
a) Personne qui est tenue, aux termes d’une convention portant sur une fourniture, de payer la contrepartie de la fourniture;
(b) where paragraph (a) does not apply and consideration is payable for the supply, the person who is liable to pay that consideration, and
b) personne qui est tenue, autrement qu’aux termes d’une convention portant sur une fourniture, de payer la contrepartie de la fourniture;
(c) where no consideration is payable for the supply,
c) si nulle contrepartie n’est payable pour une fourniture :
(i) in the case of a supply of property by way of sale, the person to whom the property is delivered or made available,
(i) personne à qui un bien, fourni par vente, est livré ou à la disposition de qui le bien est mis,
(ii) in the case of a supply of property otherwise than by way of sale, the person to whom possession or use of the property is given or made available, and
(ii) personne à qui la possession ou l’utilisation d’un bien, fourni autrement que par vente, est transférée ou à la disposition de qui le bien est mis,
(iii) in the case of a supply of a service, the person to whom the service is rendered,
(iii) personne à qui un service est rendu.
and any reference to a person to whom a supply is made shall be read as a reference to the recipient of the supply
Par ailleurs, la mention d’une personne au profit de laquelle une fourniture est effectuée vaut mention de l’acquéreur de la fourniture.
[33] The closing words state that “any reference to a person to whom a supply is made shall be read as a reference to the recipient of the supply”. Since paragraph 254(2)(a) of the ETA refers to a taxable supply being made to a particular individual, the question is whether the reference to the particular individual is to read as the “recipient”. Because a “recipient” means any person who is liable under an agreement for the supply (paragraph (a) of the definition of “recipient”), if “recipient” is substituted for “particular individual”, then any person who signs an agreement of purchase and sale (and who would be liable to pay the consideration) would be a particular individual for the purposes of subsection 254(2) of the ETA regardless of whether ownership of the residential complex is transferred to that person.
[34] However, applying this interpretation would mean that paragraph 254(2)(a) of the ETA would be significantly expanded from its textual version. The text clearly provides that only an individual who acquires a residential complex as a result of a sale of that complex will be a “particular individual”. Applying the definition of recipient to the individual described in paragraph 254(2)(a) of the ETA and finding that liability for the consideration – and not the acquisition of an ownership interest – will be the sole determining factor in finding that an individual is a particular individual would result in a significant alteration to the paragraph as written.
[35] Subsection 15(2) of the Interpretation Act, R.S.C., 1985, c. I-21, provides that:
(2) Where an enactment contains an interpretation section or provision, it shall be read and construed
(2) Les dispositions définitoires ou interprétatives d’un texte :
(a) as being applicable only if a contrary intention does not appear; and
a) n’ont d’application qu’à défaut d’indication contraire;
(b) as being applicable to all other enactments relating to the same subject-matter unless a contrary intention appears.
b) s’appliquent, sauf indication contraire, aux autres textes portant sur un domaine identique.
[36] In my view, the text, context and purpose of paragraph 254(2)(a) of the ETA establish that “recipient” is not to be substituted for “particular individual”. The language chosen by Parliament expresses a contrary intention to simply applying the definition of “recipient” to the person described in paragraph 254(2)(a) of the ETA. Parliament did not use the word “recipient” anywhere in subsection 254(2) of the ETA even though this word is defined in the ETA. As well, the clear language of paragraph 254(2)(a) of the ETA limits a particular individual to one to whom “a builder of a single unit residential complex or a residential condominium unit makes a taxable supply by way of sale of the complex or unit”. “Sale” is defined in section 123 of the ETA as:
sale, in respect of property, includes any transfer of the ownership of the property and a transfer of the possession of the property under an agreement to transfer ownership of the property
vente Y sont assimilés le transfert de la propriété d’un bien et le transfert de la possession d’un bien en vertu d’une convention prévoyant le transfert de la propriété du bien
[37] Thus, a sale will include a transfer of either ownership or possession. Paragraph 254(2)(a) of the ETA refers to a “taxable supply by way of sale of the complex or unit”. “Taxable supply” is a supply made in the course of a commercial activity and “supply”, in relation to property, is the provision of that property (section 123 of the ETA). Therefore, it seems clear that a taxable supply by way of sale of a residential complex cannot take place until either ownership or possession of that complex is transferred.
[38] The wording of paragraph 254(2)(a) of the ETA suggests that an assumption of liability under an agreement of purchase and sale, in and of itself, will not be sufficient to make a person a particular individual – there must be a transfer of ownership or possession of a residential complex to that individual. This would also be consistent with the purpose of the rebate which is intended to benefit new home buyers. Individuals who purchase new homes (and who do not simply assume a liability without acquiring a beneficial interest) should be the particular individuals who will have to satisfy the occupancy requirements of paragraphs 254(2)(b) and (g) of the ETA. As a result, in my view, the word “recipient” should not be substituted for “particular individual” in paragraph 254(2)(a) of the ETA.
D. Section 133 of the ETA
[39] The Crown also referred to section 133 of the ETA:
133 For the purposes of this Part, where an agreement is entered into to provide property or a service,
(a) the entering into of the agreement shall be deemed to be a supply of the property or service made at the time the agreement is entered into; and
(b) the provision, if any, of property or a service under the agreement shall be deemed to be part of the supply referred to in paragraph (a) and not a separate supply.
133 Pour l’application de la présente partie, la fourniture objet d’une convention est réputée effectuée à la date de conclusion de la convention. La livraison du bien ou la prestation du service aux termes de la convention est réputée faire partie de la fourniture et ne pas constituer une fourniture distincte.
[40] The Crown submits that based on this section, the supply of the residential complex was made when the agreement of purchase and sale was entered into (which presumably was when any conditions precedent were satisfied). Therefore, Dr. Akbari acquired an interest in the residential complex at that time. There was no trust declaration signed by Dr. Akbari when he entered into the agreement as this was not completed until the closing of the purchase of the property.
[41] The purpose of section 133 of the ETA is summarized by the Department of Finance in the Explanatory Notes at p. 35:
Under this section [133], the entering into of an agreement to supply any property or service will be treated as a supply of the property or service, made at the time the agreement is entered into. As a consequence, GST applies to any prepayment or part payment of the consideration for a supply even if, at the time payment is made, property has not in fact been transferred or the service has not yet been rendered. In these circumstances, paragraph 133(b) treats the actual provision of the property or service under the agreement as being a part of the same supply and not as a separate supply.
[42] This Explanatory Note suggests that section 133 was intended to relate to the liability for tax under the ETA. However, the new housing rebate provisions relate to a rebate of tax under the ETA. The question is whether, based on a textual, contextual and purposive analysis, section 133 of the ETA applies for the purposes of subsection 254(2) of the ETA, and in particular, whether the time for determining if an individual is a particular individual is when the agreement of purchase and sale is entered into (section 133) or when the sale of the residential complex actually occurs (based on the requirement of paragraph 254(2)(a) of the ETA that there must be a supply by way of sale).
[43] As noted, paragraph 254(2)(a) of the ETA provides that there must be a supply by way of sale of a single unit residential complex (or a residential condominium unit). In this case, Mr. Cheema acquired a single unit residential complex.
[44] Subsection 41(1) of the Regulations provides that the definition of “single unit residential complex” as defined in subsection 254(1) of the ETA is adopted for the purposes of the Regulations. However, this definition of “single unit residential complex” only expands the definition of “single unit residential complex” to include certain multiple unit residential complexes. A detached house would not be included in the parts added by subsection 254(1) of the ETA. The general definition of “single unit residential complex” in section 123 of the ETA provides that:
single unit residential complex means a residential complex that does not contain more than one residential unit, but does not include a residential condominium unit.
immeuble d’habitation à logement unique Immeuble d’habitation, à l’exclusion d’un logement en copropriété, qui contient au plus une habitation.
[45] The definitions of residential complex and residential unit (which are incorporated into the definition of residential complex) are lengthy but essentially require the existence of a building (or a mobile home or floating home) where an individual resides or could reside. In this case, when the agreement of purchase and sale was entered into, there was no building. The agreement provided that the house was to be constructed.
[46] If section 133 were to apply to determine when the taxable supply by way of sale of the residential complex occurs for the purposes of paragraph 254(2)(a) of the ETA, then as a result of the deeming rule in paragraph 133(a) the supply of the residential complex would have occurred when the agreement was entered into, at which time there was no building. “Supply”, in relation to property, is defined in section 123 as the provision of property in any manner including sale. “Sale” is defined as including a transfer of ownership. If the supply by way of sale of the residential complex is deemed to have occurred when the agreement of purchase and sale was entered into, then it would seem to also mean that, for the purposes of the ETA, ownership of that residential complex would have been deemed to have been transferred at that time. Although “sale” refers to a transfer of ownership or possession, the more logical application of the deeming rule would be to deem ownership to have been transferred for the purposes of the ETA.
[47] Although there is a transfer of ownership of the residential complex after the agreement of purchase and sale is entered into, in my view, this subsequent transfer of ownership (which, but for paragraph 133(b) would be a separate supply) would be part of the deemed supply that occurred when the agreement was entered into and not a separate supply (paragraph 133(b)), if section 133 applies. By deeming the provision of property under the agreement to be part of the supply referred to in paragraph 133(a), in my view, paragraph 133(b) would deem the transfer of ownership, for the purposes of the ETA, to have occurred as part of the supply referred to in paragraph 133(a) which would, for the purposes of the ETA,