Citation: 2011 TCC 402
HER MAJESTY THE QUEEN,
REASONS FOR JUDGMENT
The appellant applied
for the transitional rebate of 1% of the goods and services tax (the GST) pursuant
to subsection 256.74(5) of the Excise Tax Act (the ETA). In the assessment made following the application
for the rebate, the Minister of National Revenue (the Minister) denied the rebate
of $823.35 requested by the appellant on the grounds that the appellant took
possession of her condominium prior to January 1, 2008. The appellant is
appealing from this assessment by the informal procedure.
The transitional rebate
of 1% resulted from reduction of the GST rate from 6% to 5% on January 10,
Among the conditions to
be met in order to be entitled to the rebate, subsection 256.74(5) of the ETA
requires that the ownership and possession of a residential complex be
transferred to the appellant after December 2007 under an agreement of purchase
and sale signed after May 2, 2006, but on or before October 30, 2006. Paragraph 256.74(5)(a)
reads as follows:
–2008 rate reduction
(5) If a particular individual
to an agreement of purchase and sale, evidenced in writing, entered into after
May 2, 2006, but on or before October 30, 2007, is the recipient of a taxable
supply by way of sale from another person of a residential complex in respect
of which ownership and possession under the agreement are transferred to the
particular individual on or after January 1, 2008,
the Minister shall, subject to subsection (7),
pay a rebate to the particular individual equal to the amount determined by the
The conditions set out under
paragraphs 256.74(5)(b) and (c) have been met. The only issue is the
date on which the appellant took possession of her condominium.
On September 25, 2007,
the appellant signed a preliminary contract with 9071-1920 Québec Inc for the
purchase of a condominium located at 4228 Pavillion Street in Sherbrooke. The
occupation date set out in the contract was November 16, 2007. The GST
calculated at the 6% rate was $7,718.86. The price in the contract after taxes
On December 4, 2007,
the appellant sold her residence located at 4455 Gatineau Street in Sherbrooke.
Under the contract of sale, the purchaser became the owner of the immovable starting
at the date of the contract of sale with immediate possession and occupation.
Prior to the sale of
the residence, in late November 2007, the appellant moved into the condominium.
At this date, the unit was substantially completed and liveable. According to
the evidence, the contractor kept a copy of the keys to the unit to enable him
to complete the work.
On March 18, 2008, the
appellant signed a notarized contract of sale for the purchase of the
condominium and the vendor credited the amount of the new housing credit to the
appellant. Under this contract the appellant became the owner starting on the
date of the contract with immediate possession and occupation.
On May 15, 2008, the
appellant filed a tax adjustment request regarding the residential complex and she claimed on this
form that the date that the offer to purchase was signed was September 25, 2007, in other words,
after May 2, 2006, but on or before October 30, 2007, but that the date she
took possession and the date ownership was transferred was on March 18, 2008, in
other words, on or after January 1, 2008, which entitled her to a rebate
of 1% of the GST paid.
The appellant contends
that, although she moved into the unit at the end of November 2007, she did so
only as a tenant with permission of the contractor on the one condition that
she pay for electricity. The appellant did not pay monthly fees until the date
of the transfer of ownership title to the immovable. The appellant adduced a residential
insurance policy, tenant subscriber as of November 30, 2007. This insurance
policy was amended on March 18, 2008, to become a residential condominium unit
According to the
evidence, the appellant paid for the condominium on March 18, 2008, at the
notary’s office, the same date when she also signed a hypothecary loan with the
National Bank of Canada. For the period from the end of November 2007 and March
18, 2008, the appellant did not pay municipal taxes or school taxes for her
The evidence also
revealed that, starting at the beginning of December 2007, the appellant made a
change of address with the Ministère du Revenu du Québec and the Société
d'assurance automobile du Québec and she had the telephone installed and
subscribed to Bell Express Vu service.
At issue in this case
is the interpretation by the parties of the term "possession" used in
paragraph 256.74(5)(a) of the ETA. The appellant claimed that the term “possession”
must be as defined in article 921 of the Civil Code of Québec (C.C.Q.).
Article 921. Possession is the exercise in fact, by a
person himself or by another person having detention of the property, of a real
right, with the intention of acting as the holder of that right.
The intention is presumed. Where it is lacking, there
is merely detention.
According to the appellant, the concept of
"possession" necessarily refers to the concept of possession under
the notarized contract of March 18, 2008.
According to counsel
for the respondent, the concept of "possession" should instead be interpreted
within the broad meaning of “detention” or “occupation”.
With respect to the definition
of the term “possession”, author Pierre‑Claude Lafond in Précis
de droit des biens, 2nd edition, Montréal: Thémis, 2007, p. 201 stated the
Defined in this way, possession sometimes can be referred to as
“legal possession” or “civil possession”. Thus, the terms “natural possession”,
“permissive possession” and “detention” are juxtaposed. The use of the term
“possession” should be restricted to situations involving “legal possession”,
in other words, those that produce actual effects. In other situations, the
term “detention” should be used exclusively.
The definition set out in article 921 of the C.C.Q. is
the ordinary law definition. Specific statutes may explicitly or implicitly, attribute
a different meaning to this term for specific purposes.
According to the
following statement by Professor and legal writer, Pierre‑André Côté, from
The Interpretation of Legislation, 3rd edition, Montréal: Thémis, 2000,
. . . Because a word’s meaning is derived from its context, it is
hazardous to shift from one law to another without making adjustments dictated
by the new context.
Since it is possible for
two statutes from the same legal system to use the same term to describe two
different situations, this is even more likely if the same term is used in a
contract drafted by a notary in a civil law system whereas the ETA was
originally drafted in English in a common law system.
The ETA does not define
the terms "possession" and "ownership". The concept of
"possession" under civil law is irreconcilable with the meaning that
Parliament wanted to confer on the term in ETA provisions regarding the
transitional rebate, since possession is an attribute of ownership rights.
Since Parliament does not speak in vain, a meaning must be given to the term “possession”
for it to have any effect. When interpreting a legislative provision, the
provision must be read as a whole keeping its purpose in mind. The current tax
adjustment applies only to individuals who entered into an agreement of
purchase and sale of a residential complex after May 2, 2006, but on or before
October 30, 2007, in respect of which ownership and possession under the
agreement are transferred on or after January 1, 2008, which is not the
case here. In the specific context of a transitional tax rebate, the term “possession” should
be interpreted as meaning “occupation” or “detention”.
Moreover, this interpretation
complies with the interpretation made by this Court in Don Wallace Reynolds and
Paul Po Hui Pei v. The Queen, 2009 TCC 470 (Paris J.) and Morgan Eastman
and Ann Cavrak v. The Queen, 2009 TCC 482 (Woods J.) regarding the application
of paragraph 256.3(1)(a) of the ETA, a transitional measure with
wording similar to that of paragraph 256.74(5)(a), which was implemented
when the GST was reduced from seven to six percent On July 1, 2006.
For all of these
reasons, the appeal is
Signed at Ottawa, Canada, this 25th day of August
Translation certified true
On this 27th day of September 2011