Citation: 2012 TCC 116
Date: 20120405
Docket: 2011-1994(GST)I
BETWEEN:
ZUBIN PHEROZE DARUWALA, AIMAI DARUWALA
AND MAKI PHIROZE DARUWALA,
Appellants
(Respondents to Application),
and
HER MAJESTY THE QUEEN,
Respondent
(Applicant).
REASONS FOR ORDER
Bocock J.
[1]
The
Respondent brings this application under section 311 of the Excise Tax Act,
pursuant to an indication from the Minister of National Revenue (“Minister”)
that she is of the opinion that a question arising out of the series of
transactions or occurrences is common to, and will affect, an assessment or
proposed assessment in respect of two or more taxpayers. Under section 311, if
this Court be satisfied that the determination of the question will affect the assessments
or proposed assessments, then the Court may join the parties to one appeal and
determine the question put.
[2]
The
facts relating to the application are as follows. The Appellants (Respondents
to the Application) applied for a GST rebate with respect to a residential property
located in West Vancouver, British Columbia (“the Residence”); claiming that the
Residence fell within the definition of “used residential property” and was therefore
exempt from GST in accordance with Schedule V, Part I of the Act. The Applicant
asserts pursuant to facts contained in the affidavit of Vince Ting, Litigation
Officer with the CRA, that the Appellant purchased the “never occupied” Residence
from the builder, TRG Construction Corp. (“TRG”). There are no contradicting
assertions of fact regarding the “never occupied” nature of the Residence in
the affidavit. The assertion of the Appellant from its pleadings, to be
advanced, adduced and proven at the hearing, is that TRG did allow an
undisclosed third party to occupy the Residence between the time of
construction and the Appellants’ purchase of it. If TRG allowed such an
interceding occupancy (“Interceding Occupancy”), the Appellants may otherwise
be entitled to their GST rebate presently denied by the Minister. The Minister
seeks to have this question of fact, namely, whether there was or was not an Interceding
Occupancy determined by this Court and to render any determination binding upon
both the Appellant and TRG.
Statutory Authority
[3]
Section
311 of the Excise Tax Act states:
311(1) Where the Minister is of the opinion that a
question arising out of one and the same transaction or occurrence or series of
transactions or occurrences is common to assessments or proposed assessments in
respect of two or more persons, the Minister may apply to the Tax Court for a
determination of the question.
(2)
An application made under subsection (1) shall set out
(a) the question in respect of which the Minister requests a
determination,
(b)
the names of the persons that the Minister seeks to have bound by the
determination of the question, and
(c)
the facts and reasons on which the Minister relies and on which the Minister
based or intends to base assessments of each person named in the application,
and
a copy of the application shall be served by the Minister on each of the
persons named therein and on any other person who, in the opinion of the Tax
Court, is likely to be affected by the determination of the question.
(3)
Where the Tax Court is satisfied that a determination of a question set out in
an application made under this section will affect assessments or proposed
assessments in respect of two or more persons who have been served with a copy
of the application and who are named in an order of the Tax Court under this
subsection, it may
(a)
if none of the persons so named has appealed from such an assessment, proceed
to determine the question in such manner as it considers appropriate; or
(b)
if one or more of the persons so named has or have appealed, make such order
joining a party or parties to that or those appeals as it considers appropriate
and proceed to determine the question.
(4)
Subject to subsection (5), where a question set out in an application made
under this section is determined by the Tax Court, the determination thereof is
final and conclusive for the purposes of any assessments of persons named by it
under subsection (3).
(5)
Where a question set out in an application made under this section is
determined by the Tax Court, the Minister or any of the persons who have been
served with a copy of the application and who are named in an order of the
Court under subsection (3) may, in accordance with the provisions of this Part,
the Tax Court of Canada Act or the Federal Courts Act, as they
relate to appeals from or applications for judicial review of decisions of the
Tax Court, appeal from the determination.
(6)
The parties bound by a determination under subsection (4) are parties to any
appeal therefrom under subsection (5).
(7)
The time between the day an application made under this section is served on a
person under subsection (2) and
(a)
in the case of a person named in an order of the Tax Court under subsection
(3), the day the determination becomes final and conclusive and not subject to
any appeal, or
(b)
in the case of any other person, the day the person is served with notice that
the person has not been named in an order of the Tax Court under subsection
(3),
shall
not be counted in the computation of
(c)
the four-year periods referred to in section 298,
(d)
the time for service of a notice of objection to an assessment under section
301, or
(e)
the time within which an appeal may be instituted under section 306,
for
the purpose of making an assessment of the person, serving a notice of
objection thereto or instituting an appeal therefrom, as the case may be.
[4]
The
relevant section of 18.32(2) of the Tax Court of Canada Act provides:
18.32(2) If an application has been made under . .
. section 311 of the Excise Tax Act . . . for the determination of a
question, the application or determination of the question shall, subject to
section 18.33, be determined in accordance with sections 17.1, 17.2 and 17.4 to
17.8, with any modifications that the circumstances require.
[5]
In
addition section 58(1)(a) and (2) of the Tax Court of Canada Rules
(General Procedure) provide as follows:
58(1) A party may apply to the Court,
(a)
for the determination, before hearing, of a question of law, a question of fact
or a question of mixed law and fact raised by a pleading in a proceeding where
the determination of the question may dispose of all or part of the proceeding,
substantially shorten the hearing or result in a substantial saving of costs,
or
[…]
and
the Court may grant judgment accordingly.
(2)
No evidence is admissible on an application,
(a)
under paragraph (1)(a), except with leave of the Court or on consent of
the parties, or
(b)
under paragraph (1)(b).
[…]
[6]
The combination
of the above noted informing statutes and rules require the Court to determine
whether it will hear the proposed question of fact referred to above.
[7]
The Court
has previously considered the issue of a common question contained within the
case of Skinner Estate v. Her Majesty the Queen [2009] DTC 1358; [2009]
TCC 269. In that case, largely decided on quite different facts, the Court
stated of its own rule, 58(1)(a);
[35] Before embarking on the answer
to a question posed under paragraph 58(1)(a), the Court must first
determine whether it is appropriate to do so. In Carma Developers Ltd. v. Canada, cited
with approval by the Federal Court of Appeal in Jurchison v. Canada,
Christie, A.C.J. cautioned that:
…
paragraph 58(1)(a) of the Rules is not intended as an easily accessible
alternative to a trial for the disposition of complex and contentious disputes
about the rights and liabilities of litigants. It is to be invoked when it is
clear that the determination of all or part of a dispute by trial would be
essentially redundant.
[8]
In
considering the caution issued in Skinner Estate, this Court in Brenneur
v. Her Majesty The Queen [2010] TCC 610 (which case also dealt with considerable
constitutional and common law rights related to language and fairness rights), analyzed
the corresponding sections contained within the Income Tax Act, namely
section 174(1), which provides:
174(1)
Where the Minister is of the opinion that a question of law, fact or mixed law
and fact arising out of one and the same transaction or occurrence or series of
transactions or occurrences is common to assessments or proposed assessments in
respect of two or more taxpayers, the Minister may apply to the Tax Court of
Canada for a determination of the question.
[9]
In
addressing whether sufficient facts or reasons submitted by the Minister would
“affect” two or more taxpayers, Justice Boyle, at paragraphs 34 and 35 of Brenneur,
stated:
[34] However, there
is a further issue in this case, and that is whether there is a proposed reassessment
of Mr. Batalha by the CRA. This Court can only order a reference under section
174 in respect of taxpayers who have been assessed in respect of a common
question arising out of the same circumstances or in respect of taxpayers for
whom an assessment is proposed. At this time, the CRA has neither reassessed
Mr. Batalha nor even proposed to him in writing that he should be reassessed or
indicated that he was being considered for reassessment. Indeed, after
investigation, the CRA has accepted Mr. Batalha’s version of events and only
reassessed Mr. Brenneur. The Respondent’s counsel has gone so far as to say
that the CRA accepts entirely Mr. Batalha’s version of events and would only be
contingently or conditionally considering reassessing Mr. Batalha in the event
this Court should decide Mr. Brenneur’s tax appeal in Mr. Brenneur’s favour.
The Respondent submits that the possibility of reassessment constitutes a
proposed reassessment. No authority is cited in support of that proposition.
The question thus arises whether this conditional, contingent intention to
consider reassessing Mr. Batalha does in fact constitute a proposed
reassessment or “cotisation projetée” of Mr. Batalha for the purposes of
meeting the requirements of section 174. . . . .
[35] I am not
satisfied that such a contingent intention to consider reassessing a taxpayer
constitutes a proposed assessment of that taxpayer for the purposes of section
174. It is often the case that a taxpayer and one of the other witnesses are
adverse in fiscal interest and that they give conflicting testimony. It does
not seem appropriate that each time that occurs the CRA should have the right
to ask the Court to consider making the witness a party to the tax proceeding.
It is the CRA’s responsibility to investigate and decide which version of the
facts it believes is more likely than not correct. While it may be appropriate
in a close or grey-area case to permit the CRA to ask the Court to consider
ordering a reference, this hardly seems appropriate where the CRA, after
investigation, has concluded clearly in one direction and not the other. Again,
while references in circumstances such as those in the present case would
remove the risk of inconsistent decisions ultimately being issued by the Court
in two different proceedings, that would come at a remarkable and unjustifiable
price if all witnesses in tax appeals whose fiscal interests were adverse to
the appellant’s were to be subject to applications for section 174 references
to have them joined as parties to the appeal in which they are otherwise
testifying or being compelled to testify. Since I do not accept that there is a
proposed reassessment by the CRA of Mr. Batalha for the purposes of section
174, this Court has no jurisdiction to grant the respondent’s application for a
reference of common questions and the application will be dismissed, with
costs.
[10]
In the
present case, the uncontroverted facts contained in the Respondent’s own
Affidavit comprise the only factual basis upon which this Court may decide
whether the threshold established in Brenneur is met and therefore, whether the
question of fact ought to be predetermined prior to the usual hearing of the
single appeal. The Appellants have provided no affidavit evidence and take no
position. The third party, TRG, understandably has filed no affidavit evidence,
but has provided written submissions from legal counsel.
[11]
From Brenneur,
the following questions may be posed in respect of the factual record;
1.
Has
the Applicant provided the Court with evidence of independent communication by
the taxing authority to the proposed assessee or some other reasonable indication
that it may reassess the proposed assessee?;
2.
What
evidence has been submitted of an actual or proposed investigation, review or
survey of the proposed assessee’s affairs, history or file in the context or in
pursuance of a proposed reassessment?; or
3.
What
submissions have been made regarding the expected efficiencies to be gained
from joining a proposed and actual assessment into a single question for the
Court to determine prior to the otherwise pending hearing of the single appeal?
[12]
Factually,
in respect of the proposed assessee, TRG, the Applicant has:
1.
provided
no representations or evidence of any direct communication to TRG of any possible
reassessment or any grounds or basis for same;
2.
disclosed
no results, facts or conclusions arising from any conduct of a review of TRG’s
files in order for the Minister to assess the likelihood of any proposed
reassessment; and
3.
disclosed
no reasonable, tangible or theoretical efficiencies to be gained from the prior
determination of the question, rather than simply proceeding with the otherwise
pending hearing of the single appeal.
[13]
On the
final point, it should be noted that the Appellant’s present appeal is
proceeding under the Excise Act, Informal Procedures of this Court. The
appeal appears to be entirely factually based. It is a reasonable proposition that
simply proceeding to a hearing of the present single appeal under such streamlined
rules would equally simplify the process; without the need of involving the
third party in an equally, if not procedurally more complicated process in
order to determine a factual, as opposed to a legal question under section 311.
Based upon the timid and hardly evident nature of any proposed reassessment by
the Minister of TRG in the Applicant’s submissions, on balance the Court finds
that the outcome of the single party appeal will more fulsomely, expeditiously
and determinatively confirm the CRA’s ultimate decision regarding any proposed reassessment
of TRG.
[14]
Therefore,
the application is denied by the Court, the question shall not be considered
and Docket Number 2011-1994(GST)I, otherwise pending for hearing, should
proceed forthwith to a hearing under the Court’s Excise Act, Informal
Procedures. Costs may have been awarded in favour of the third party, TRG, had
an actual appearance or oral submissions by conference call occurred or been
required. Given written submissions by letter sufficed, there shall no order as
to costs.
Signed at Toronto, Ontario, this 5th day of April 2012.
“R.S. Bocock”
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