Citation: 2013 TCC 121
Date: 20130527
Docket: 2012-1698(GST)I
BETWEEN:
SIMON
FRASER UNIVERSITY,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
AMENDMENT REASONS FOR JUDGMENT
C. Miller J.
[1]
This Informal Procedure
Goods and Services Tax ("GST") Appeal deals with whether GST is
exigible on fines collected by Simon Fraser University for parking infractions
in the period of April 2003 to May 2005. The Director of Parking Services
at Simon Fraser University, Mr. Agosti, gave thorough, detailed evidence of the
parking arrangements at Simon Fraser University.
[2]
Mr. Agosti described
the role of Parking Services to provide parking to members of the University
community in a fair, cost-effective manner. Mr. Guthrie, Director of
Financial Services at Simon Fraser University confirmed that parking is
certainly not a business or profit centre, but is there to support the mandate
of education, research and community, and notes that is just one of several
ancillary services intended to be self-sustaining; that is, to cover direct
administrative, operating and debt costs.
[3]
There are four types of
parking spaces at Simon Fraser University:
a) permit lots, being
parking lots with spaces for students and staff to acquire on a monthly,
semester or yearly basis; an actual space can be reserved or simply a specific
lot can be identified;
b) visitor lots, being
parking lots for those with reason to be at Simon Fraser University on a short-term basis, where tickets are obtained from a ticket vending machine
("TVM") on an hourly basis;
c) other areas that are
non-paid short-term spots such as loading zones; and
d) student residential
parking, which is not under the control of Parking Services and not at
issue before me.
[4]
During the period in
issue there were approximately 5600 spaces in the permit lots and visitor lots.
Interestingly, since the period in issue both the supply and demand for parking
spots has significantly decreased. It was clear from both Mr. Agosti’s and
Mr. Guthrie’s testimony that the University encouraged minimizing parking
facilities by promoting transit. Mr. Guthrie stated that the University does
not see parking as a business but is simply purpose driven by the need to
support the University mandate.
[5]
With improved transit (for
example, the University pass available to all students) combined with the
University’s plans for developing either University related buildings or
residential buildings, the number of spots has fallen by at least 1000, and
appears to be set to continue to decline.
[6]
Permit lots were identified
with a sign indicating permits only or with some additional wording
"unauthorized vehicles will be impounded at owners/drivers expenses".
Mr. Agosti indicated that impounded meant either a wheel lock or boot on the car
or towing, though the latter only in the event the driver had three outstanding
fines.
[7]
Signs for visitor lots
had more information, normally located near the pay station:
Visitors
Parking Information
Parking
Procedure:
1.
Park vehicle first
2.
Purchase receipt from machine
3.
Display receipt face up on front dash at all
times while vehicle is parked
Parking
Rate: (in effect 24 hours daily)
$2.75
per hour (or portion thereof)
Daily
Maximum:
$11.75
Monday – Friday
$6.00 Weekends
& Holidays
Evening
Rate (1900 – 0800 hours):
$2.75
flat rate for period (or portion thereof)
FOLLOW
INSTRUCTIONS ON MACHINE
PLEASE
NOTE
Vehicles
not displaying valid receipts are subject to ticketing and impoundment at the
owners/drivers expense. Vehicle and contents left at owners risk. Simon Fraser University does not take custody of vehicles but rents space only.
Contact
Campus Security Patrol at 778-782-3100 if further assistance is required.
[8]
The University hired
one or two people to patrol and enforce the parking regulations, and would
issue a ticket to be left on the car for any of the following infractions:
a) no valid permit displayed;
b) no valid TVM receipt;
c) expired TVM receipt;
d) improperly parked within the lot;
e) contravention of a sign;
f) handicap space;
g) prohibited area or space.
[9]
The ticket, identified
as a Traffic Offence Notice ("TON") states:
It
is alleged that on the date shown the owner (or operator) of the vehicle upon
which was displayed the licence number plate described below committed the
following infraction contrary to the traffic and parking regulations of Simon Fraser University.
It goes on to say:
You
are required to submit payment within 72 hours to the SFU Campus Security
Department…in the amount stated above…
The amounts could be $30, $50 or $100; according to
Mr. Agosti they were mainly $30 tickets. On the reverse of the TON was written:
This
Traffic Offence Notice is issued under the authority of section 27 of the University
Act of British Columbia.
[10]
To be clear, it is only
the fines, as I indicated normally $30, with respect to the first three
infractions listed above that are at issue (approximately $8,484) along with
the fines for wheel locks ($2,849).
[11]
It was clear from Mr.
Agosti’s and Mr. Guthrie’s testimony that parking fines were not a revenue tool
but a compliance tool. Of the approximate 10000 tickets issued annually, 2500
were waived, 3500 were paid and 4000 were not paid. The collection of
approximately $100,000 is countered by the $200,000 cost of enforcement. As Mr.
Guthrie put it, the University wanted compliance; those who parked without
paying anything were in effect stealing from the University.
[12]
Finally, Mr. Guthrie
made it clear that the Government of British Columbia has significant control
over the University by appointing the majority of Board Members, funding a
third of their revenue and having certain reporting requirements.
[13]
Attached as Appendix A
to these Reasons is a copy of section 27 of the University Act of British Columbia.
Issue
[14]
Is Simon Fraser University liable to collect and remit GST on parking fines as described herein, either
as consideration for the taxable supply of a parking spot or pursuant to
section 182 of the Excise Tax Act (the "ETA")?
This issue can be further subdivided into the following issues:
a) Is there a contract for the supply
of a parking space?
b) Is the payment of the fine
consideration for that space?
c) Is the payment of the
fine payment for a breach of an agreement for the supply of that space, bringing
section 182 of the ETA into play?
d) If there is no
contract, is there a taxable supply, and was the payment of the fine
consideration for that supply?
[15]
The Appellant argues
that the fines were pure fines, levied pursuant to statutory authority (the University
Act) and therefore not subject to GST. The payment did not flow from any
contract, as found in the case of Imperial Parking Ltd. v. R.. There
was no agreement to pay the fine as consideration for the parking spot, nor as
payment for the breach of any agreement. As the Appellant’s counsel put it, it
simply does not fit.
[16]
The Respondent argues
that one must look to the true nature of what the payment was for. A fine is
not defined in the ETA and is not therefore specifically excluded from
the operation of the GST scheme. The Respondent suggests we go back to basics.
Section 165 of the ETA imposes GST on a taxable supply at the rate
of 5% on the value of the consideration for the supply. Taxable supply is
defined in section 123 of the ETA as a supply made in the course of a
commercial activity. "Supply" has a broad meaning: the provision of
property or a service in any manner, including sale, transfer, barter,
exchange, licence, rental, lease, gift or disposition.
[17]
Based on the finding
of the Federal Court of Appeal in the Imperial Parking case, the
Respondent goes on to argue there was an agreement once the non-paying driver
left the car in the parking lot. The Respondent argues, given the broad
definition outlined above, that the driver either agreed to pay the fine amount
as consideration for the supply of the parking spot or alternatively, there was
an agreement, which the non-paying driver breached and section 182 of the ETA
deems the fine amount to be consideration. If I find there is no agreement,
the Respondent maintains there is still a taxable supply, the supply of the
parking spot in the course of a commercial activity, and that the payment of
the fine amount is consideration for that supply. This latter position strikes
me somewhat circuitous, as how can there be consideration if there is no
agreement.
[18]
This is a tricky issue,
and I thank counsel for the thorough job of arguing it. The dilemma is that a
pure fine, a speeding ticket for example, is not subject to GST. And because
the University derives its authority to fine from the University Act,
at first glance it appears to be more in the nature of a pure fine than
consideration for the parking spot itself. But I need to explore that further.
[19]
I will first address
the question of a university’s authority to impose a fine. This is extensively
canvassed at trial in the British Columbia Supreme Court and on
appeal at the British Columbia Court of Appeal in Barbour v. The University of British Columbia.
At trial, it was found that the imposition of a parking fine was outside the
University’s authority. The University of British Columbia had tried to argue
that it could contract to impose such a penalty, but again the trial Court said
no, as the entity whose very existence arises from statute, if imposing a parking
fine is ultra vires, then attempting to privately contract to do the
same is likewise ultra vires.
[20]
Before the British
Columbia Court of Appeal heard the appeal, the British Columbia Government
retroactively amended the University Act to give universities the power to
impose parking fees (see Appendix A). The British Columbia Court of Appeal then
ruled that the power to levy parking fines was intra vires.
Implicitly it is likewise intra vires for a university to contract
to impose a parking fine.
[21]
Both Parties referred
me to the Federal Court of Appeal decision of Imperial Parking Ltd. v.
R.
where Imperial Parking, a private enterprise, had the following sign on
their unattended lot:
Please
Read Carefully…This is Private Property
Imperial
Parking Limited is by this sign, offering space for public parking. You accept
this offer by parking on this lot. All requirements of notice and acceptance
are hereby waived by Imperial Parking Limited. If you park, but do not display
a valid ticket or pass, the rate is $50.00 per day or portion thereof and you
car may be subject to being towed, in either case, if you park here, Imperial
Parking Limited considers you to have accepted their offer of a parking space.
Do not park on this lot if you do not agree to these terms. Imperial Parking
Limited does not by the levy of $50.00 rate exclude its rights to tow any car
parked on this lot without a valid ticket or pass on the dash.
[22]
The Tax Court of Canada
and the Federal Court of Appeal had little difficulty in finding there is an
agreement between Imperial Parking and the non‑paying driver
pursuant to which the non-paying driver agreed to pay $50.00 for the parking
spot. It is how the Federal Court of Appeal determined there was an agreement,
which is of significance. I rarely repeat such a major portion of a judgment
but Justice Robertson’s comments address the very concerns I raised with
counsel:
13 Properly
construed, the agreement contemplated by the appellant's signage is that a
motorist will pay a maximum of $50 per day for use of a parking space and less
if the terms of the contract relating to payment of the lower hourly, daily or
evening rates are adhered to. The terms of the contract are clear. If you want
to pay less for a parking spot, purchase a ticket for the time needed. If you
overstay, then you will pay more than the minimum as well as run the risk of
having your vehicle towed. In summary, an overstayer remains contractually
bound to the appellant until such time as the latter receives payment in
accordance with the terms of the contract.
…
16 First,
the appellant's argument proceeds on the mistaken belief that the law is slow
to recognize foolish bargains. As a matter of law, this is simply not true.
Persons who enter into what some might consider a foolish agreement are
contractually bound until such time as they are able to convince a court that
they should be relieved of their contractual obligations under one of the
equitable doctrines such as unconscionability, duress or incapacity. Even then,
there is no guarantee that the court will dissolve the contract ab initio.
In any event, the person who parks in one of the appellant's lots and
intentionally does not purchase a ticket cannot invoke equity to come to his or
her aid because of the “clean hands” requirement. Moreover, in the
circumstances outlined by the appellant, there is no inequality of bargaining
power on the part of those who decide to occupy a parking space without paying.
While the appellant characterizes the person who parks without purchasing a
ticket as “trespasser”, the more appropriate label is that of “gambler”.
17 The
second ground for rejecting the appellant's submission is that it is premised
on the belief that no reasonable person would agree to the contractual terms
set out in the appellant's signage. The inference being drawn by the appellant
is that the terms of the contract are somehow unreasonable. The fact of the
matter is that overstaying a parking meter in the City of Ottawa costs $25 and
the possibility of one's vehicle being towed remains open. In the present case,
the reality is that motorists who overstay in one of the appellant's lots pay a
minimum of $25 and a maximum of $50 and the same holds true for those who abuse
the honour system by failing to purchase a ticket at the outset. Those who
remain undeterred and decide to gamble cannot complain if issued with a
violation notice or if their vehicle is ultimately towed. Having regard to the
legitimate business interests of the appellant when operating a totally automated
parking lot, and the inherent difficulty in conducting business on the honour
system, it is not obvious to me that the terms set out at the entrance to the
appellant's lots are either unconscionable or unreasonable. Arguably, they are
intended to serve the legitimate business purpose of encouraging drivers to pay
at the outset.
18 Thirdly,
the appellant is effectively arguing that a refusal to pay is evidence of an
intention not to enter into an enforceable contract. This argument ignores the
distinction between an intention to create legal relations and an intention to
honour one's contractual obligations. The former relates to the formation of a
contract, while the latter goes to the issue of its performance. A person who
agrees to purchase goods and receives them remains contractually bound to pay
for them irrespective of whether there was ever an intention to do so. Thus, it
is irrelevant to the issue of contract formation whether those receiving goods
or services intended to pay for them.
19 The
final ground for rejecting the appellant's submission is that proof of
contractual intention is an objective one and, thus, even if one person
believes that he or she is not bound, the law will recognize the formation of a
contract unless the other contracting party knew otherwise. Under the objective
theory of contract formation, the law seeks to determine whether there has been
unequivocal acceptance of an offer. In the case of the automated parking lot,
acceptance must be by conduct, for that is the only way in which
intention can be ascertained objectively in the circumstances of this case. In
my view, the unequivocal conduct which constitutes acceptance of the
appellant's offer to provide a parking space occurs when the driver leaves the
lot after parking his or her vehicle. This interpretation is reinforced by the
text of the large sign posed at the entrance to the appellant's lot. That is
the point in time in which an owner can be deemed to have accepted the
appellant's offer. Any time before that moment, a driver can demonstrate his
rejection of the appellant's offer by driving away. Those who purchase a ticket
must be deemed to have accepted the appellant's contractual terms upon leaving
their parked vehicle in the appellant's lot. As for those who park their
vehicles but fail to pay, the act of non-payment is more consistent with the
intention to breach a contract than a refusal to enter into one.
[23]
Following this
analysis, is there a contract between Simon Fraser University and the
non-paying driver? It is hard to suggest otherwise. By the driver’s conduct in
taking the parking space, knowing there is a requirement of a permit or TVM
ticket to prove payment, and leaving without having complied, now with a TON
indicating that the driver owes the University $30, the non-paying driver has,
in accordance with the Federal Court of Appeal’s reasoning, struck a deal with
the University.
[24]
Certainly the deal
struck in the Imperial Parking case was to pay a rather large amount for
the parking spot. As the Federal Court of Appeal pointed out, the signage
reinforced that interpretation, making it clear what the deal was. But what was
the deal between Simon Fraser University and the non-paying driver? When the
non-paying driver got out of his or her car all he or she knew was that he or
she had not paid, and he or she should have; further, there was some risk of
impoundment and ticketing, implying a financial charge of some sort. It was
immaterial to such a driver whether such a charge arose from Simon Fraser University’s statutory authority, or, given that statutory authority, the implicit
right to contract to incur such a charge. Was the customer agreeing to a
contract to pay $30 for the parking spot, for the customer certainly knew
before he drove out of the parking lot, by receipt of the TON, that he owed
$30? No, unlike Imperial Parking, this notice was not clear that he
was agreeing to $30 for a parking spot. Indeed, it was clear the TON was for an
infraction, and it was issued under the authority of section 27 of the University
Act. This is quite a different contractual term than was set out in the Imperial
Parking sign, where clearly the payment was consideration for the space.
The terms of the agreement between Simon Fraser University and the non-paying
driver holding a TON is, if you neither have a permit nor pay the posted hourly
charge you will be fined, because we, the University, have the statutory
authority to fine you. While, in accordance with the Federal Court of Appeal
approach in Imperial Parking that a contract is created upon the driver
parking and getting out of the vehicle, the terms of the contract are not the
same. Imperial Parking had no authority to fine the non‑paying
driver, but could only contractually make him responsible for paying more for the
parking spot. Simon Fraser University, however, had an additional and
significant arrow in its quiver, being the statutory authority to fine. Such a
payment is no longer for the parking spot: the non-paying driver gave up any
right to pay the normal hourly charges for a parking spot by leaving the
vehicle without doing so. The TON does not say you now have to pay more for the
parking spot: it says you must pay for an infraction.
[25]
This leads to whether
the payment is caught by section 182 of the ETA, which is worth
repeating:
(1) For the purposes of this Part, where at
any time, as a consequence of the breach, modification or termination after
1990 of an agreement for the making of a taxable supply (other than a
zero-rated supply) of property or a service in Canada by a registrant to a
person, an amount is paid or forfeited to the registrant otherwise than as
consideration for the supply, or a debt or other obligation of the registrant
is reduced or extinguished without payment on account of the debt or obligation,
(a) the
person is deemed to have paid, at that time, an amount of consideration for the
supply equal to the amount determined by the formula
(A/B) × C
where
A
is 100%,
B
is
(i) if
tax under subsection 165(2) was payable in respect of the supply, the total of
100%, the rate set out in subsection 165(1) and the tax rate for the
participating province in which the supply was made, and
(ii) in
any other case, the total of 100% and the rate set out in subsection 165(1),
and
C
is the amount paid, forfeited or
extinguished, or by which the debt or obligation was reduced, as the case may
be; and
(b) the
registrant is deemed to have collected, and the person is deemed to have paid,
at that time, all tax in respect of the supply that is calculated on that
consideration, which is deemed to be equal to
(i) where
tax under subsection 165(2) was payable in respect of the supply, the total of
the tax under that subsection and under subsection 165(1) calculated on that
consideration, and
(ii) in any
other case, tax under subsection 165(1) calculated on that consideration.
[26]
This provision is
premised on there being a contract for a taxable supply, which is being
breached. I have found that the contractual terms of the contract between a non‑paying
driver and Simon Fraser University do not provide for consideration for a
parking spot, but an agreement by the non-paying driver to run the risk of
having to pay a fine. There is not an intention to breach an agreement to pay
for the taxable supply of parking; the agreement is not to pay consideration for
the supply of the parking spot: the agreement is basically, if I get caught I
pay a fine. I agree that seems a somewhat, dare I say it, "fine"
distinction, but it does recognize the fine, in this case, is indeed just that,
a fine, pure and simple, and if there is no term in the agreement for the
taxable supply to a non-paying driver other than to be subjected to a fine,
there is no breach that would invoke section 182 of the ETA.
[27]
Perhaps it simply comes
down to the essence of a fine. The Respondent’s counsel pointed out a
definition from the Dictionary of Canadian Law that a fine is a pecuniary
penalty or other sum of money. I prefer the Canadian Oxford Dictionary
definition of a sum of money exacted as a penalty for an offence. Note that
this does not state a payment for a breach of contract. Clearly, Simon Fraser University had statutory authority to invoke a fine for a traffic offence.
This is what it did – a classic example of a fine. This is reinforced by the
philosophy of Simon Fraser University that parking was not a profit
centre. The fines were imposed because the non-paying drivers were effectively
stealing. Notwithstanding there may have been a contract, I have concluded that
in these circumstances GST is not exigible on the fine.
[28]
The Appeal is
allowed, without costs, and the matter is referred back to the Minister of
National Revenue for reassessment on the basis that the Appellant is not liable
to collect and remit GST on the parking fines as described in these Reasons.
These Amended Reasons for Judgment are issued in
substitution of the Reasons for Judgment dated April 22, 2013.
Signed at Ottawa, Canada, this 27th day of May
2013.
"Campbell J. Miller"
University
Act
[RSBC 1996] Chapter 468
Powers of board
27(1) The
management, administration and control of the property, revenue, business and
affairs of the university are vested in the board.
(2) Without limiting subsection (1) or the
general powers conferred on the board by this Act, the board has the following
powers:
…
(s) to enter into agreements on
behalf of the university;
(t) to regulate, prohibit and impose
requirements in relation to the use of real property, buildings, structures and
personal property of the university, including in respect of
(i) activities and events,
(ii) vehicle traffic and parking, including
bicycles and other conveyances, and
(iii) pedestrian traffic;
(t.1) to regulate, prohibit and impose
requirements in relation to noise on or in real property, buildings and
structures of the university;
(t.2) for the purposes of paragraphs (t) and
(t.1), to provide for the removal, immobilization or impounding, and recovery,
of any property associated with a contravention of a rule or other instrument
made in the exercise of a power under this section;
(t.3) to set, determine and collect fees for
the purposes of paragraphs (t) to (t.2), including in relation to approvals,
permits, security, storage and administration, and expenses related to any of
these;
…
(u) to acquire and deal with
(i) an invention or any interest in it, or
a licence to make, use or sell the product of an invention, and
(ii) a patent, copyright, trade mark, trade
name or other proprietary right or any interest in it;
…
(x) to make rules consistent with the
powers conferred on the board by this Act;
(x.1) to impose and collect penalties,
including fines, in relation to a contravention of a rule or other instrument
made in the exercise of a power under this section;
(x.2) to provide for the hearing and
determination of disputes arising in relation to
(i) the contravention of a rule or other
instrument made in the exercise of a power under this section, and
(ii) the imposition of a
penalty under paragraph (x.1);
(y) to do and perform all other matters and things that
may be necessary or advisable for carrying out and advancing, directly or
indirectly, the purposes of the university and the performance of any duty by
the board or its officers prescribed by this Act.
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