Extendicare Health Services Inc. v. MNR, 87 DTC 5404, [1987] 2CTC 179 (FCTD)

The Associate Chief Justice:—The applicant seeks an order by way of mandamus under section 18 of the Federal Court Act requiring the respondent to issue certificates pursuant to section 44.25 of the Excise Tax Act, R.S.C. 1970, c. E-13. The matter came on for hearing in Toronto, Ontario, on May 25, 1987.

The application is supported by the affidavit of Douglas J. Harris, Extend- icare's controller. It reveals that the applicant, an incorporated company, operates a large number of institutions across Canada, under the name "Extendicare". The Extendicare homes are all owned by incorporated companies controlled by the applicant. They all provide long-term nursing care for aged, infirm or incapacitated persons. Each home is in receipt of aid from the government of the province in which it is located and operates under provincial nursing home legislation. Services are available to anyone who needs them and who satisfies certain residency requirements. The provincial governments pay between 50 and 80 per cent of the total per diem ward rate and the residents pay the remainder. The applicant admits that the homes are run for profit, which presumably is distributed as dividends to shareholders.

On June 3, 1985, Extendicare submitted applications to Health and Welfare Canada for certification of two of its homes under the predecessor to section 44.25 of the Excise Tax Act. That section reads as follows:

Sec. 44.25. Definitions. —(!) in this section,

"certified institution ".—"certified institution” means an institution that by a certificate issued by the Minister of National Health and Welfare is certified to be, as of the day specified in the certificate,

(a) a bona fide public institution whose principal purpose is to provide care for children or aged, infirm or incapacitated persons, and

(b) in receipt annually of aid from the Government of Canada or the government

of a province for the care of persons described in paragraph (a);

"specified day". —"specified day”, in relation to an institution, means the later of

(a) the day specified in a certificate referred to in the definition “certified institution” as the day on which the institution became an institution as described in paragraphs (a) and (b) of that definition, and

(b) the first day of the fiscal year in which the application for a certificate referred to in the definition “certified institution” was made.

(2) Payment where use by certified institutions.— Where tax under Part V has been paid in respect of any goods and a certified institution has purchased the goods on or after the specified day for the sole use of the institutions and not for resale, an amount equal to the amount of that tax shall, subject to this Part, be paid to that institution if it applies therefor within two years after it purchased the goods.

(3) Payment where use by certified institution under construction.—Where tax under Part V has been paid in respect of any goods and an institution under construction that subsequently becomes a certified institution, or a person acting on behalf of such an institution, has purchased the goods within two years before the specified day for the sole use of the institution and not for resale, an amount equal to the amount of that tax shall, subject to this Part, be paid to that institution if it applies therefor within two years after the day on which the certificate was issued in respect of the institution.

Applications for the other homes were submitted thereafter. An official of the respondent Department replied to these applications, indicating that the term "bona fide public institution” had been defined in Department guidelines as being one which derives its operational authority and support from public sources as opposed to one which is owned and operated for private purposes or personal gain. Because the applicant's institutions are profit-making, they fall outside this definition.

Extendicare's argument on this application is that profit is irrelevant and that since Extendicare has fulfilled all conditions set out in the Act, the Minister is under a duty to issue the certificates. I must therefore consider whether the Extendicare homes qualify for certification under paragraph 44.25. There is no question that they satisfy the requirements of government aid and providing care for aged or infirm persons. The remaining question is whether they constitute "bona fide public institutions”.

There is no definition of the term in the statute, so the search for meaning must begin elsewhere. I was referred during the hearing to a decision of the Ontario Court of Appeal which deals with the definition of a “public hospital". In Struthers v. Town of Sudbury (1900), 27 O.A.R. 217, the Court of Appeal considered a section of the Assessment Act, R.S.O. (1887) Ch. 193, section 7, which exempted from taxation "Every . .. public hospital . . .". The issue was whether Sudbury General Hospital, which was privately owned and managed for profit, qualified for the exemption. The applicants here laid great stress on the following passage from this decision (at 221):

That an institution is established for private gain or is held in a private hand is not necessarily inconsistent with its being in its nature of a public character.

It is important, however, to put this statement in context. The Court prefaced its holding in this matter by noting:

Other clauses of the exemption section do not throw much, if any, light on the subject. (at 220)

and

In the absence of any legislative declaration on the subject, and the words “public hospital" having no technical meaning or any precise legal meaning, it seems more reasonable to hold that they are used in their popular sense and that any institution which, though not in a strictly legal right, in a popular sense may be called a public hospital, may claim exemption . . . (at 222).

We are more fortunate in this case in that the other clauses of section 44.25 serve to cast considerable light on the meaning of a "bona fide public institution”. There are three prerequisites for an institution to be certified under this section:

1. it must be a bona fide public institution;

2. it must provide care for children or aged, infirm or incapacitated persons; and

3. it must be in receipt annually of aid from the government of Canada or a province.

There is no disagreement that Extendicare meets conditions 2 and 3. Essentially, the applicant's argument is that by doing so it also meets condition number 1. To accept that interpretation is to conclude that the first condition is superfluous and adds nothing to the law. Since Parliament has taken the trouble to confine the benefit of these provisions, not just to public institutions, but to bona fide public institutions, those words cannot be ignored.

It has been recognized as a "settled canon of construction" that

. . . a Statute ought to be so construed that, if it can be prevented, no clause, sentence, or word shall be superfluous, void, or insignificant. (R. v. Bishop of Oxford (1879), 4 Q.B.D. 245 at 261).

This principle was given even clearer articulation by Viscount Simon in Hill v. William Hill (Park Lane) Ltd. [1949] A.C. 530 at 546:

. . . it is to be observed that though a Parliamentary enactment (like parliamentary eloquence) is capable of saying the same thing twice over without adding anything to what has already been said once this repetition in the case of an Act of Parliament is not to be assumed. When the legislature enacts a particular phrase in a statute the presumption is that it is saying something which has not been said immediately before. The rule that a meaning should, if possible, be given to every word in the statute implies that, unless there is good reason to the contrary, the words add something that would not be there if the words were left out.

This doctrine of construction has also found approval in Canada. (See, for

example, Re Canadian Pacific Railway Co. and Rural Municipality of Lac Pelletier, [1944] 3 W.W.R. 637.)

What, then, is a bona fide public institution? The word "institution" was given careful consideration by Kovacs, Co. Ct. J. in Re Attorney-General of Ontario and Tufford Rest Home et al. (1980), 30 O.R. (2d) 636. In that case he was deciding whether a privately-owned nursing home was subject to inspection under the Public Institutions Inspection Act, 1974 (Ont.), c. 64. He began with dictionary definitions (at 639):

I was given various definitions of "institution". The New Oxford Dictionary defines “institution” as:

3. Organization for promotion of some public object, religious, charitable, reformatory, etc.; building used by this; (esp. pop.) building used by benevolent or educational institution.

The Oxford English Dictionary gives the definition:

7. An establishment, organization, or association, instituted for the promotion of some object, esp. one of public or general utility, religious, charitable, educational, etc., e.g., a church, school, college, hospital, asylum, reformatory, mission, or the like.

It would appear that the connotation of “institution” bears with it the concept of it having a public object. The evidence was that the private company operating the nursing home in this instance had the object of operating a nursing home for private profit. I hold that the concept of private profit is alien to the generally- accepted meaning of an institution. I note as well that the Act is entitled, in s. 9, as "The Public Institutions Inspection Act, 1974”. (emphasis added.) Accordingly, the concept of “institution” having a connotation of a public object, as distinguished from a private enterprise, is reinforced by the adjective “public” used in the title to the Act.

I accordingly hold that privately operated nursing homes are not "institutions" within the meaning of s. 4 of the Public Institutions Inspection Act, 1974.

I find this analysis very appropriate to the problem we are considering in this case. I would observe that, as in the statute before Kovacs, Co. Ct. J., section 44.25 reinforces the word “institution” with the adjective “public”. Black's Law Dictionary defines a “public institution” as

One which is created and exists by law or public authority, for benefit of public in general; e.g., a public hospital, charity, college, university, etc.

The Shorter Oxford English Dictionary gives the adjective "public" as meaning:

1. Of or pertaining to the people as a whole.

2. Done or made by or on behalf of the community as a whole.

3. That is open to may be used by, or may or must be shared by, all members of the community; generally accessible or available . . . Also (in narrower sense), that may be used, enjoyed, shared or competed for, by all persons legally or properly qualified.

4. Open to general observation.

5. Of, pertaining to, or engaged in the affairs or service of the community.

6. Of or pertaining to a person in the capacity into which he comes into contact with the community.

7. Devoted or directed to the promotion of the general welfare; public-spirited, patriotic. Now chiefly in phrase “public-spirited”.

Finally, the term "bona fide", when used as an adjective, is generally taken to mean “honestly”, "genuinely" or "in good faith”. (See Stroud's Judicial Dictionary, 4th Ed., (London, 1977) 302-305). It seems obvious that Parliament used these specific words to emphasize that tax exemptions should be reserved for organizations which, in addition to providing health care to the public, are either publicly owned or publicly operated.

Indeed, that appears to be the only interpretation which would accomplish the statute's purpose. The object of section 44.25 is to relieve organiza tions which are supported entirely by tax money from paying further taxes. If an institution is created and supported by the taxpayers through one taxing authority, it doesn't make sense for it to pay taxes to another. There is no reason to conclude, however, that Parliament intended by section 44.25 to improve the profit picture of a privately-owned company even if it does provide health care services to the public.

I therefore find that the Extendicare homes are not entitled to be granted certificates under section 44.25 of the Excise Tax Act. The application will be dismissed with costs.

Application dismissed.