Date: 20000626
Docket: A-27-99
A-28-99
A-29-99
A-30-99
CORAM: ISAAC J.A.
ROBERTSON J.A.
SHARLOW J.A.
BETWEEN:
IMPERIAL PARKING LIMITED
Appellant
- and -
HER MAJESTY THE QUEEN
Respondent
Heard at Vancouver, British Columbia, on Wednesday, June 14, 2000
JUDGMENT delivered at Ottawa, Ontario, on Monday, June 26, 2000
REASONS FOR JUDGMENT BY: ROBERTSON J.A.
CONCURRED IN BY: SHARLOW J.A.
CONCURRING REASONS BY: ISAAC J.A.
Date: 20000626
Docket: A-27-99
A-28-99
A-29-99
A-30-99
CORAM: ISAAC J.A.
ROBERTSON J.A.
SHARLOW J.A.
BETWEEN:
IMPERIAL PARKING LIMITED
Appellant
- and -
HER MAJESTY THE QUEEN
Respondent
REASONS FOR JUDGMENT
ISAAC J.A.
[1] I have had the privilege of reading, in draft, the reasons for judgment of my colleague, Robertson J.A., in this appeal. I agree with his conclusion that there was a taxable supply of parking space and with his proposed disposition of the appeal. However, I prefer to rest my agreement on simpler and less erudite grounds.
[2] The dispositive reasons of the learned Tax Court Judge are found at paragraphs 6 and 7 where he states:
| Thus the Court is dealing with a discrete group: the persons who have paid the Appellant"s rates as set forth in the sign or the Appellant"s lesser rate as set forth on the back of the violation notice if payment is made within 72 hours. In the Court"s view these two rates as set forth on the notice board and the violation notice constitute offers by the Appellant. Each person who parked accepted the offer on the sign. The offer consisted of a parking "rate ... per day or portion thereof". Acceptance by the payor created a contract for providing parking space, the consideration for which was the amount paid pursuant to the sign or the discount stated on the violation notice. |
| Persons parking either without a ticket or over the time allotted in the ticket were common on each parking lot. Collection respecting overparking was a normal part of the Appellant"s business. Thus, the amounts in question constitute a taxable supply.1 |
[3] I am in respectful agreement with these reasons and, consequently, would dispose of the appeals in the manner which my colleague, Robertson J.A., has proposed. A copy of these reasons shall be filed in Court File Nos. A-28-99, A-29-99, and A-30-99, and shall be considered the reasons for judgment in each case.
"Julius A. Isaac"
J.A.
Date: 20000626
Dockets: A-27-99
A-28-99
A-29-99
A-30-99
CORAM: ISAAC J.A.
ROBERTSON J.A.
SHARLOW J.A.
BETWEEN:
IMPERIAL PARKING LIMITED
Appellant
- and -
HER MAJESTY THE QUEEN
Respondent
REASONS FOR JUDGMENT
ROBERTSON, J.A.
[1] This is but one more tax case in which the outcome is dependent on neither principles of taxation law nor statutory interpretation. Rather success hinges on the proper application of contractual principles. It is a classic case in that it deals with the issue of "offer and acceptance" within the context of an unattended parking lot in which payment can be effected only by the purchase of a ticket from a dispensing machine situated on the lot. The case differs from the earlier jurisprudence in that it is the parking lot owner, rather than the owner of a vehicle, who is arguing against contract formation. The essential facts are as follows.
[2] These consolidated appeals are from a judgment of the Tax Court of Canada dated December 18, 1998 dismissing the appellant"s appeals from four reassessments issued by the Minister of National Revenue under the Excise Tax Act . The appellant is in the business of operating parking lots throughout Canada, some of which are operated by an attendant while others are fully automated. At the entrance to each of the unattended lots is a sign which prominently displays a host of information. The top portion of the sign specifies the hourly, daily and evening rates and provides that a ticket must be purchased from the dispenser and then placed on the dashboard of the vehicle. This portion of the sign goes on to provide that the appellant takes no responsibility for the vehicle or its contents but that it is renting space only. Potential customers are warned that vehicles which do not display a valid ticket (one in which time has not expired) will be "ticketed" or "towed". The bottom portion of the sign reads as follows:
| 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 YOUR 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 RIGHT TO TOW ANY CAR PARKED ON THIS LOT WITHOUT A VALID TICKET OR PASS ON THE DASH. |
[3] Vehicles that are parked on a lot and which do not display a ticket or display a ticket which has expired are issued a violation notice. In that notice the appellant claims as damages $50 which is reduced to $25 if paid within 72 hours from the time the notice issues. The violation notice also states that if the amount is not paid then any future breach may result in the vehicle being towed. In fact, only those who are repeat "offenders" have their vehicle towed. The appellant has never taken any person to court who has failed to pay in accordance with a violation notice. However, the appellant does utilize the services of a collection agency in order to encourage payment.
[4] The question which arises on these appeals is whether the amounts collected and remitted to the appellant by the collection agency pursuant to violation notices constitute consideration for a "taxable supply" that are subject to payment of GST. The appellant submits that there is no contractual relationship between it and those who park their vehicles without purchasing a ticket or who overstay the time purchased. There being no contractual relationship, the appellant maintains that monies paid in response to a violation notice constitute damages for trespass which are not a taxable supply under the Act . Accordingly, the appellant argues that GST is not payable with respect to the amounts in question. At the same time, it concedes that monies received as damages for breach of contract are subject to GST pursuant to section 182 of the Act.
[5] Like the Tax Court Judge, I am of the view that the monies received by the appellant in response to the issuance of violation notices are subject to GST. In my respectful view, the argument that no contractual relationship exists between those who either fail to purchase a ticket or who overstay their allotted time is without legal foundation.
[6] At the outset, I wish to make clear that I respectfully decline the invitation to reconcile the jurisprudence dealing with contractual formation in the parking lot context or to distinguish cases which invariably turn on factual considerations and issues irrelevant to the case at hand: see for example, City Parking Services v. Murray et al, 99 Nfld. P.E.I.R. and 315 A.P.R. 11 and Controlled Parking Systems Ltd. v. Sedgewick [1980] 4 WWR 425. And see generally, Heffron v. Imp. Parking Co. (1974), 46 D.L.R. (3d) 642 (Ont. C.A.); Smith (Samuel) & Sons Ltd. v. Silverman (1961), 29 D.L.R. (2d) 98 (Ont. C.A.); Palmer v. Toronto Medical Arts Bldg. Ltd. (1960), 21 D.L.R. (2d) 181 (Ont. C.A.); Mitchell v. Silverman, [1952] O.W.N. 130 (C.A.); Bata v. City Parking Can. Ltd. (1973), 43 D.L.R. (3d) 190 (Ont. C.A.); Brown v. Toronto Auto Parks Ltd., [1955] 2 D.L.R. 525 (Ont. C.A.); Adams (Durham) v. Trust Houses, [1969] 1 Lloyd"s Rep. 380; Ashby v. Tolhurst, [1937] 2 K.B. 242 (C.A.).
[7] To facilitate my analysis I am going to assume that a distinction should be drawn between monies received from those who do not purchase a ticket and those who do, but qualify as "overstayers". With respect to the latter group, the appellant concedes that a contractual relationship does arise at the time a ticket is purchased. However, the appellant argues that the contractual relationship comes to an end following the expiration of the purchased time. Thereafter, it is said that the overstayer is a trespasser. In my opinion, this argument cannot succeed for the following reasons.
[8] I am aware of only one type of contract which might conceivably be said to dissolve with the passage of time and that is an option contract in which one party has a right to insist on performance by the other party provided that the option is exercised by a prescribed date. Leaving aside this exceptional category of cases, it is clear in law that contractual rights and obligations are extinguished where, for example, there is full performance by the parties, mutual recission or the doctrine of frustration is deemed applicable. In cases where there is a material breach by one of the parties it is often said that the innocent party is discharged from future performance. But this does not mean that the innocent party loses the right to sue for breach of contract or that the contract is no longer in existence. The innocent party can still seek damages as specified in the contract. In the present case, the fact that the amount of parking time purchased by the driver of a vehicle has expired does not mean that the contract has come to an end.
[9] For example, I agree to rent a truck at $50 per hour for three hours and to return the vehicle at the end of that period. The fact that I return the truck two hours late does not mean that the rental contract has come to an end and that I cannot be sued for breach of contract. My obligation to pay damages for breach of contract remains intact, as does the lessor"s right to seek enforcement of any contractual provisions governing such breaches. Thus, if the rental agreement provided that I pay $60.00 for each hour that the vehicle was returned late the lessor could resort to that provision when claiming damages for breach of contract rather than relying solely on common law principles relating to damage assessment.
[10] 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.
[11] Strictly speaking, it is unnecessary for me to consider the legal relationship between the appellant and those who do not purchase a ticket from the outset in order to resolve the appeals at hand. I say this because no attempt has been made to isolate monies received from those who were overstayers and those who simply did not purchase a ticket. The fact that a contractual relationship exists between the appellant and one category of customers is sufficient to dispose of the appeals. That being said, I think it only fair to explain why the appellant"s argument cannot succeed even if I were to assume that money was collected only from those who failed to purchase a ticket.
[12] The appellant"s argument begins with the concession that the sign placed at the entrance to each parking lot constitutes an offer to contract on terms that are clearly displayed. It then argues that acceptance of that offer must be demonstrated by the conduct of the vehicle"s driver and that such conduct must be clear and unequivocal. No one can quibble with these legal propositions. It is the following reasoning advanced by the appellant which is faulty. The appellant maintains that the act of parking on one of its lots without purchasing a ticket is demonstrative of non-acceptance of the offer specified on the sign displayed at the entrance to the parking lot. In the appellant"s opinion, the act of parking without purchasing a ticket is, to a reasonable person, more consistent with an intention not to engage in a contractual relationship with the appellant. As well, the appellant contends that no reasonable person would conclude that a motorist who parked on the appellant"s lot without purchasing a ticket intended to accept the terms of the offer contained in the signage. The appellant maintains that no reasonable person would agree to pay $50 a day for parking and accept the risk of being towed, when he or she could pay a substantially lesser amount and remove the risk altogether. According to the appellant"s submission, the only reasonable conclusion is that persons parking without purchasing a ticket do not intend to pay anything for parking on the chance that they will not be caught or that their vehicle will not be towed. In short, the appellant insists that such persons are mere trespassers. This cannot be so for at least four reasons.
[13] 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".
[14] 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.
[15] 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.
[16] 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.
[17] For the above reasons, I find that the monies received by the appellant in response to a violation notice constitute a taxable supply and are therefore subject to GST. It is common ground that the Tax Court Judge overlooked the fact that an agreement had been reached by the parties that the appeal in 98-351 (GST)G (A-28-99) would be allowed in part in order to give effect to $16,261.11 in input tax credits with a corresponding reduction in related interest and penalties. Otherwise, the four appeals should be dismissed with one set of costs. The appeal in A-27-99 being the lead appeal, a copy of these reasons shall be placed in the remaining three files and be deemed the reasons of the Court in each.
"J.T. Robertson"
J.A.
"I agree
K. Sharlow J.A."
__________________
1 Reasons for Judgment, Appeal Book, page 27.
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