Citation: 2006 FCA 413
CORAM: LINDEN J.A.
is an appeal from a judgment of Bonner J., a judge of the Tax Court of Canada
(the Judge) dated September 9, 2005 (reported as 2005 TCC 601). In his reasons,
the Judge determined that goods and services tax (GST) must be collected under
subsection 165(1) of the Excise Tax Act, R.S.C. 1985, E-15 (the Act) on
fees charged by the appellant, a registered charity, to persons attending its summer
camps for children and youth.
a general rule, the Act exempts most supplies made by charities. This appeal
deals with an exception to that rule: namely, the supply by a charity of any
“service involving supervision or instruction in any recreational or athletic
activity.” The appellant contends that because of the evangelical Christian
character of the camp and its programs it is not within this exception.
II. Legislative Background
165(1) of the Act requires a service supplier to collect GST on the
consideration paid for that service. This is subject to a number of exemptions
based on variables such as the nature of the supplier, the nature of the goods
or services supplied, the nature of the consumer or purchaser of the services
and where the goods or services are consumed. An exempt supply is defined in subsection
123(1) to mean a supply that is included in Part V.1 of Schedule V of the Act.
1 of Part V.1 specifically exempts a supply made by a charity of any property
or service. However, there are exceptions, and the exception relevant to this
paragraph 1(f) of
Part V.1, which provides:
A supply made by a charity of any property or service, but not
including a supply of
a service involving, or a membership or other right entitling a person to,
supervision or instruction in any recreational or athletic activity….
fourniture de biens ou de services par un organisme de bienfaisance, à
l’exclusion des fournitures suivantes :
f) la fourniture d’un service de supervision ou
d’enseignement dans le cadre d’une activité récréative ou sportive, ou un
droit d’adhésion ou autre droit permettant à une personne de bénéficier d’un
tel service, sauf si,…
is defined at section 123(1) of the Act as a registered charity within the
meaning of section 248 of the Income Tax Act. There is no dispute
that the appellant is a registered charity and that its purposes and activities
are charitable so as to potentially qualify for the GST exemption under paragraph
III. Factual Background
appellant pursues its charitable purposes by operating programmes in various religious
fields, such as missionary organizations, publishing and broadcasting, seminars
and camps. During the taxation years under review, the appellant operated
camps at four locations in Ontario which were aimed at
children of various age groups. There were four types of camps to choose from:
a girl’s camp, a boy’s camp, a junior camp and a camp known as Discovery. These
first three camps were for children aged six through fifteen while the
Discovery camp was a religious leadership training programme for those aged
sixteen through eighteen. During the winter, the appellant follows up with its
young volunteer staff and also trains them for the upcoming summer camp season.
the children’s camps, the appellant supplied services to boys and girls, which
included supervision, religious instruction, and instruction in recreational
and athletic activities. The services also involved overnight supervision of
each child throughout the entire duration of the child’s stay. The camp
offered a full range of typical summer camp activities, such as canoeing,
kayaking and swimming.
Appellant advertised the role and function of all its camps as follows:
a Christian Camp whose mission is to present Jesus Christ and His message from
the Word of God through an excellent camping programme balancing spiritual
teaching, fun and physical activity and year round discipleship of Staff and
Campers in association with evangelical churches and ministries.
senior camp staff and counsellors were selected on the basis of their religious
training credentials. Other than its volunteer counsellors, the majority of
the staff operating the camps was Commended Workers of Plymouth Brethren denominations,
who are equivalent to clergy or ministers in other denominations.
Notwithstanding its character as a Plymouth Brethren camp, the camps were open
to campers of all other religion faiths.
children arrived at the camps on Sunday afternoons and remained there for a
week. Schedules for each camp were adhered to on a daily basis. Typically,
the children wake up at around 7:30 am and eat breakfast at 8:30 am. Following
breakfast, the children were involved in a forty-five minute ‘impact period’
which involved worship and teaching. The rest of the morning was spent on
instruction periods involving recreational and athletic activity. The
afternoon included periods of rest, clean-up and about an hour was allocated
for children to choose their own activity, such as swimming or kayaking. After
dinner, the children were often involved in group activities, such as baseball
or soccer, and for about forty-five minutes at the end of the day, religious
single fee was charged to cover the cost of the entire camping programme. The
cost of sporting and recreation instruction was five to ten per cent of the
total cost of the camp. The remainder covered expenses such as accommodation,
meals, upkeep of the installations, insurance, utilities and labour.
the year 2000, the appellant, along with a number of other registered
charities, stopped collecting GST on fees paid in respect of their programmes
after the Minister of National Revenue (Minister) discontinued the appeal to
this Court of the decision in Camp Kahquah v. The Queen,  4
C.T.C. 2882 [Camp Kahquah]. In that case, the
Tax Court judge had determined that Camp Kahquah’s sole purpose
was to conduct a Christian camp and that the recreational facilities and
instruction were incidental to its purpose. Accordingly, he held that Camp Kahquah was not subject
to paragraph 1(f).
the Minister assessed the appellant under Part IX of the Act for the period of
October 1, 1999 to December 31, 2001 on the basis that GST was eligible on the fees
it charged for attendance at its camp. The appellant objected and appealed to
the Tax Court of Canada.
Tax Court Decision Under Appeal
Judge found as a fact that the appellant’s program involved supervision or
instruction in recreational and athletic activities and that, in addition to
the times devoted exclusively to religious activities, religion was also
interwoven with all aspects of daily life at the camp (reasons at paragraph
12). However, the predominant element of the service provided was supervision
and teaching in recreation and sports; an element not altered either by the
camp’s religious purpose or by periods of prayer and reflection (reasons at
paragraph 20). In attempting to distinguish the Camp Kahquah
decision from the present case, Bonner J. stated at paragraph 50:
In my view Kahquah
is distinguishable. It appears to rest on findings that the provision of
recreational facilities and instruction was part of and incidental to the
taxpayer’s religious purpose and that the supply was therefore not a supply of
supervision of instruction in the field of recreation or sports as required by
the legislation there under consideration.
Judge therefore concluded that the appellant’s fee for services was subject to
GST under the Act.
V. Standard of Review
appellate review, the nature of the questions at issue determines the
applicable standards of review. Questions of law are reviewable on a standard
of correctness, while findings of fact or of mixed law and fact will be set
aside only if it is determined that the trial judge has committed a palpable
and overriding error (see Housen v. Nikolaisen,  2 S.C.R. 235).
case deals with questions of mixed law and fact; however, issues arise where a
question of mixed fact and law is, in essence, more legal than factual and vice
versa. Accordingly, where the issue deals with a question of the
Judge’s interpretation of a legal test, then his decision on that issue will be
reviewed on a standard of correctness. Where the Judge applied the proper
legal test to the facts before him, then more deference is warranted and his
decision will be reviewed on a palpable and overriding standard unless a
question of more general law can be readily extricated.
VI. Issues on Appeal
specific issues must be decided:
Judge commit a reversible error in his interpretation and application of
Judge err in determining that the incidental supplies rules in section 138 did
not apply? And
Judge have followed the earlier Tax Court’s decision in Camp Kahquah?
Issue 1: Did the Judge commit a
legal error in his interpretation and application of paragraph 1(f)?
considered the nature of the services supplied by the camps rather than their
purpose. At paragraph 23 he stated:
As I see it,
the charitable (religious) purpose which underlies the Appellant’s activities
cannot be considered to remove the activities from the ambit of paragraph (f)
unless the purpose and measures adopted to carry it out are all so pervasive
that the nature of the service supplied is changed from that of a children’s
summer camp to something else. The purpose does not effect such a change
here. The service supplied was that of a summer camp, and not, for example,
that of a religious school offering a period or two of gymnastics.
appellant argues that the Judge erred in not considering the actual purpose of
the recreational activities offered by the camp in his interpretation of
paragraph 1(f). It relies on the Supreme Court of Canada’s decision in Vancouver
Society of Immigrant & Visible Minority Women v. MNR,  1 S.C.R.
10 to support this position. Paragraph 152 states:
… it is
really the purpose in furtherance of which an activity is carried out, and not
the character of the activity itself, that determines whether or not it is of a
charitable nature. … inquiry must focus not only on the activities of an organization
but also on its purposes.
passage, however, was advanced by Gonthier J. in order to determine if
activities were charitable for the purpose of establishing eligibility of an
applicant for registration as a charity under the Income Tax Act. That
is not our case. Here, the Minister admitted that the appellant’s underlying
charitable purpose is the advancement of religion. It seems to me that if the
purpose test was to apply to paragraph 1(f), the answer would always be that
the activity is charitable, and the exception would never apply. In my
analysis, the Judge was correct in focusing on the nature of the activities rather
than their purpose.
case, the Judge began his analysis by examining both the English and French
versions of paragraph 1(f) and concluded that although, in his view, there is a
discrepancy between the two versions, both are applicable. The appellant argues
that the Judge erred in reaching this conclusion, reasoning that the general
exemption is not lost merely because a service includes some instruction or
supervision in athletic or recreational activities.
English version of paragraph 1(f) speaks of a service “involving” supervision
or instruction in any recreational or athletic activity. The French version states: la fourniture
d’un service de supervision ou d’enseignement dans le cadre d’une
activité récréative ou sportive. This translates as a service of supervision or
teaching in the context of recreational or sporting activity. The
appellant suggests that in reconciling differences between the English and
French versions of a statute their shared meaning should be sought (Perrier
Group of Canada v. Her Majesty the Queen,  1 FC 586), which in
this case is the narrower, French version.
In my view,
Bonner J. was correct to conclude that in this case any differences between the
English and French texts are insignificant. The services here fall squarely within
the language of both the French and English versions of paragraph 1(f) and
there is no need to reconcile the two versions. The English version excludes
from the exemption any service by a charity, which involves supervision or
instruction in any recreational or athletic activity. The appellant’s
programme is one that involves the supervision or instruction of religious,
athletic and recreational activities and therefore, is caught by the English
version of paragraph 1(f). The text does not require that the recreational and
athletic activity constitute the major component.
Similarly, the services offered by the
appellant fall squarely within the French version of the text: religious
instruction in the context of recreational and athletic activities. Accordingly,
any discrepancy between the English and French versions of paragraph 1(f) does
not render the appellant exempt from GST as both versions apply to the service
Issue 2: Did the Judge err in determining that
the ‘incidental supplies’ rule in section 138 did not apply?
of the issues before the Judge was whether this transaction consisted of a
single supply composed of two intertwined and interdependent elements or
whether it was multiple supplies; two services supplied for one consideration
with one dominant and the other subservient. The Judge found this transaction
to be one of single supply; the fees were paid for the overall camping
appellant now argues that the Judge erred by in failing to apply the
‘incidental supplies’ rule found in section 138 of the Act:
138. For the
purposes of this Part, where
a particular property or service is supplied together with any other property
or service for a single consideration, and
it may reasonably be regarded that the provision of the other property or
service is incidental to the provision of the particular property or service
property or service shall be deemed to form part of the particular property
or service so supplied.
138. Pour l’application de la présente partie, le bien
ou le service dont la livraison ou la prestation peut raisonnablement être
considérée comme accessoire à la livraison ou à la prestation d’un autre bien
ou service est réputé faire partie de cet autre bien ou service s’ils ont été
fournis ensemble pour une contrepartie unique.
In my analysis, section 138 only applies in
the context of multiple supplies. If there is only a single supply (with
several components) then that section does not come into play. In order to
determine whether multiple services were supplied, I refer to Sharlow J.A.’s
analysis in Hidden Valley Golf Resort Assn. v. Canada (2000), 257 N.R.
164 at paragraph 17:
In each case
it is useful to consider whether it would be possible to purchase each of the
various elements separately and still end up with a useful article or service.
For if it is not possible then it is a necessary conclusion that the supply is
a compound supply which cannot be split up for tax purposes.
case, based on the evidence, it was not possible to charge separate fees for
the religious, and recreational and athletic services supplied by the appellant.
The activities were too closely integrated. Thus, the Judge correctly found
that section 138 was inapplicable to the present case.
Issue 3: Should the Judge have
followed the earlier Tax Court’s decision in Camp Kahquah?
appellant argues that the Judge had a duty to afford the judge in Camp Kahquah judicial comity in his
decision given that these cases are legally and factually almost identical. It
is said that Bonner J. should have been able to provide an understandable and
credible explanation for his differing reasons, which he did not do. Moreover,
that the Camp Kahquah decision is well-reasoned has stood since 1998 and
therefore should have been followed by the Judge.
of the principle of comity among judges of the Tax Court, a Judge will not
lightly decide not to follow a previous decision of that court. However,
failure to follow a prior decision is not a ground of appeal in this Court.
Faced with conflicting decisions of the Tax Court, the function of this Court
on appeal is to decide which of the decisions, if either, correctly states the
respect, I do not think that the Camp Kahquah reasons should have been followed. In that case, in
determining whether the supply was exempt the judge accepted evidence that was
lead regarding the purpose of the camp, instead of the nature of services it
supplied. At paragraph 27 he stated:
I accept the
extensive evidence of the Appellant’s witnesses who emphasized the stated
purpose and actual operation of the camp to that end. In particular, I accept
the evidence that the camps in question would not exist if it were not for the
religious component and the opportunity of extending evangelical exposure and
the conversion of campers. … Further, it is understandable, as the evidence
stated, that children would not be particularly interested in going to a
religious camp which lacked some of the summer sports opportunities available
at this camp.
central flaw in this reasoning is that the analysis is based on the underlying
purpose of the camp. As I have already determined, it is not the purpose but
the nature of the supply that must be examined. It should not matter that the taxpayer’s
underlying purpose was charitable. It also should not matter that recreational
activity is necessary in order to make the camp more attractive to children.
The fact is that both Camp
Kahquah and Camp
Mini-Yo-We involved supervision or instruction in the context of various recreational
or athletic activities, which is enough to remove it from the general exemption
afforded to charities.
the appellant’s assertion that the Camp Kahquah decision has stood since
1998 is of no consequence. The fact that the Crown commenced and then
discontinued an appeal of that decision means only that this Court has not yet
considered whether it is correct in law. Nor would it have mattered if the
Crown had decided not to commence an appeal at all. The Crown is not obliged
to commence or continue an appeal, or to offer a public explanation as to why
it decides to take any particular course of action.
collateral issue must be resolved. The Canadian Council of Christian Charities
and the Christian Sunday School Missions sought leave to intervene in this
appeal. That request was denied on the basis that they had not demonstrated
that their proposed intervention would assist the court as appellant counsel
was fully capable of presenting this appeal.
the appeal was argued, the appellant brought a motion for directions seeking to
amend its notice of appeal and factum to include additional relief pursuant to
section 44 of the Federal Courts Act, R.S., 1985,
That relief, if granted, would have enjoined the Minister from reassessing all
affected taxpayers for the years following the Camp Kahquah decision to
general rule respecting pleadings in an appeal is that an appellant may not
raise a point that was not argued in the court below unless all of the relevant
evidence is on the record: 671905 Alberta Inc. v. Q’Max Solutions Inc., 
4 F.C. 713 (C.A.) at paragraph 35. Accordingly, this Court should not give
effect to a point raised for the first time on appeal unless it is clearly one
of law which requires no further evidence.
this motion, the facts and evidence relating to the new relief sought under
section 44 are being raised for the first time and are not in the record below.
Nor has the appellant shown any evidence relating to third party taxpayers, namely
their identity and whether they ever offered services that could be identified
as evangelical Christian camp programmes.
Minister would be severely prejudiced by the proposed amendment which seeks to
raise issues to which he was not given an opportunity to investigate, respond
to or refute. In my view, the relief sought by the proposed amendment is
neither just nor convenient and falls outside of the ambit of section 44.
would accordingly deny the motion for directions.
appeal should be dismissed without costs.
A.M. Linden J.A.”
John M. Evans J.A.”