Drapeau v. The Queen, docket 2001-4378-GST-I (Informal Procedure)

[OFFICIAL ENGLISH TRANSLATION]

2001-4378(GST)I

BETWEEN:

GISÈLE DRAPEAU,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

Appeal heard on May 17, 2002, at Ottawa, Ontario, by

the Honourable Judge Lucie Lamarre

Appearances

For the Appellant:                      The Appellant herself

Counsel for the Respondent:      Justine Malone

JUDGMENT

          In view of the appeal from the assessment made under the Excise Tax Act ("the Act"), Part IX, notice of which, according to the Reply to the Notice of Appeal, is dated March 26, 2001, and which, according to the Notice of Appeal, is numbered 0030118771237-16 and was received by the appellant on November 5, 2001;

And in view of the attached Reasons;

The appeal is allowed with costs, if any, and the assessment is referred back to the Minister of National Revenue for reconsideration and reassessment, taking into account the fact that the appellant applied for a new housing rebate of the Goods and Services Tax ("the GST") within the prescribed time limit set out in subsection 256(3) of the Act.

The appellant is therefore entitled to a new housing rebate of the GST in the amount of $3,306.73.

Signed at Ottawa, Canada, this 26th day of July 2002.

"Lucie Lamarre"

J.T.C.C.

Translation certified true

on this 10^th day of November 2003.

Sophie Debbané, Revisor

[OFFICIAL ENGLISH TRANSLATION]

Date: 20020726

Docket: 2001-4378(GST)I

BETWEEN:

GISÈLE DRAPEAU,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

REASONS FOR JUDGMENT

Lamarre, J.T.C.C.

[1]      This is an appeal under the informal procedure from an assessment made by the Minister of National Revenue ("the Minister") denying the appellant a new housing rebate of the Goods and Services Tax ("the GST") in the amount of $3,306.73. The Minister has argued that the application was not filed within the prescribed time limit set out in subsection 256(3) of the Excise Tax Act ("the Act"), which reads as follows:

(3) Application for rebate ¾A rebate under this section in respect of a residential complex shall not be paid to an individual unless the individual files an application for the rebate within two years after the earliest of

(a) the day that is two years after the day the complex is first occupied as described in subparagraph (2)(d)(i);

(a.1) the day ownership is transferred as described in subparagraph (2)(d)(ii); and

(b) the day construction or substantial renovation of the complex is substantially completed.

[2]      The fact that the appellant had a residential complex built in the village of l'Orignal by a construction contractor and that the appellant and her spouse were the first persons to occupy the complex, starting on August 29, 1998, have not been contested. Nor, apparently, has the appellant contested the fact that she filed the application for a rebate around October 20, 2000.

[3]      What is at issue in this appeal is the date on which construction of the residential complex was substantially completed. The Minister considers that this date was August 18, 1998, that is, the date of the inspection report indicating that the complex was partially completed for residential occupancy (Exhibit I-3).

[4]      The appellant has argued that the residential complex was completed only in the spring of 2001. In support of her version of the facts, she adduced a letter from Abri-Tec Construction Inc. ("Abri-Tec"), the contractor that built the residential complex (Exhibit A-3).

[5]      Since the application for a rebate of the GST was filed in October 2000, it is important to determine the date construction was substantially completed. In fact, if the Minister's version of the facts is correct, the application would have been filed after the prescribed time limit had expired, that is, after August 18, 2000. If the appellant's version is correct, her application would have been filed within the prescribed time limit, that is, well before the earlier of two years after construction was substantially completed (the spring of 2003) or four years after the residential complex was first occupied (August 29, 2002).

[6]      Thus the only point at issue is the date on which construction of the residential complex was substantially completed.

[7]      This Court has analysed the expression "substantially completed" on a number of occasions. In Vallières v. Canada, 2001 T.C.J. No. 528 (Q.L.), Hamlyn J. wrote as follows:

¶ 15     The term "substantially completed", as it appears in paragraph 256(3)(b) of the Act, is not specifically defined in the legislation.

¶ 16      The 90% threshold test is used by the CCRA as an administrative rule of thumb. However, this test is very imprecise and has consistently been criticized. There is a complete absence of criteria on which to base such an estimate. Ostensibly, the CCRA may consider "substantially complete" to mean something less than 90%. However, it is unlikely that a level of completion below 70% would amount to "substantial completion" as envisaged by the Act.

¶ 17      The 90% or more rules must always be qualified by the fact that the purchaser must be able to reasonably inhabit the premises. To a large extent, that can have a subjective component and one has to take into account the particular purchaser, but not to the point where objective standards can be disregarded.

¶ 18     To be "substantially completed" a residential complex must be capable of being used for the purpose for which it was constructed.

¶ 19     In determining what constitutes "substantial completion" there must be a certain common-sense assessment of what, on the facts of the particular case, a reasonable person would regard as substantial completion.

[8]      In the instant case, the appellant explained that during the summer of 1998 her spouse had brain cancer that was practically in the terminal stage. Because the state of his health had become very uncertain, he became aggressive and demanded that the builder obtain the inspection certificate from the municipality so that the couple could move into the new house as soon as possible. At that time, in August 1998, the couple was living in a motor home; the appellant explained that, given the very advanced stage of her spouse's illness, they had no choice but to move into the house. The appellant's spouse died on December 9, 1998.

[9]      According to the appellant, the inspection certificate was conditional on the installation of a stair railing, ventilation, and the heating thermostat. This work was very likely completed before December 31, 1998. As well, the floor covering, painting, covering of the exterior foundation, exterior earthworks, bathroom shower and hanging of the interior doors were not completed.

[10]     According to the appellant, some of this work was completed in the fall, after the couple had moved into the house. When the appellant's spouse died, the contractor stopped all work. The contractor completed the work in the spring of 2001, after receiving the balance owing.

[11]     The residential complex was built for a total of $140,933, including taxes. On August 18, 1998, there was a balance owing of $35,933 (Exhibit I-2). According to the appellant, the value of the work to be completed was approximately $20,000. She considered that the house was between 75 per cent and 80 per cent completed at the time the couple moved into it. The November 19, 2001, letter from the contractor Abri-Tec (Exhibit A-3) reads in part as follows:

[translation]

As a result of an estate litigation, we were able to complete this residence only in the spring of 2001.

After receiving the balance owing to us ($35,000), we installed the floor covering (hardwood), hung the interior doors, and completed the exterior earthworks. We also carried out a great deal of other work in order to make the residence habitable.

[12]     With respect to this other work required to make the residential complex habitable, the appellant testified that the painting was completed and the shower installed after they had moved into the house. She also testified that some repairs were required on the windows that leaked. This statement was confirmed by Guylaine Gauthier, the spouse of Robert Gauthier, president of Abri-Tec. Ms. Gauthier added that some work in the kitchen was done and that work on the "septic field" had to be completed.

[13]     In Vallières (supra), Hamlyn J. wrote that, in determining what constitutes substantial completion, there must be a common-sense assessment of what, on the facts of the case, a reasonable person would regard as substantial completion. This approach was previously followed by Bowman J. of this Court in Lim v. Canada, [2000] T.C.J. No. 4 (Q.L.).

[14]     In the instant case, applying this type of assessment leads me to conclude that construction of the residential complex was not substantially completed by August 18, 1998. Indeed, although the appellant considered the house habitable for her very specific purposes-given the urgency of moving into the house even though not everything was completed-on the basis of the evidence, it is reasonable to conclude that construction of the residential complex was not substantially completed by August 1998, and was probably not until late fall 1998. In fact, it seems that it was at that time that the work on the stair ramp, the ventilation, the heating thermostat, the shower, the septic field, the kitchen and the painting was in fact completed (the other work apparently being completed later). In Lim (supra), it was determined that some of this type of work had to be completed before it could be said that construction of a residential complex was substantially completed.

[15]     In my opinion, therefore, the prescribed time limit for the appellant to apply for a new housing rebate of the GST did not expire before the end of 2000. However, she filed her application with the Minister around October 20, 2000. I therefore consider that the application was filed before the prescribed time period had expired.

[16]     I would add that, in her testimony, the appellant explained that she did what was needed to file her application for a rebate of the GST well before October 20, 2000, but was prevented from doing so by an officer of the Canada Customs and Revenue Agency who suggested that the application could not be filed until she obtained legal title to the property that was in her spouse's name. Given a court challenge involving the estate of the appellant's spouse, that length of time was needed for the appellant to obtain legal title to the residential complex.

[17]     I also note that if the appellant was the executor of her spouse's estate (something that was not clear from the evidence), she would not have had to wait to obtain legal title in order to apply for a rebate of the GST. Under section 267 of the Act, most of the provisions of Part IX of the Act (including the right to a rebate of the GST set out in section 256) apply as though the estate of the individual were the individual and the individual had not died.

[18]     In any case, regardless of whether the appellant was given poor advice, I am of the opinion to allow the appeal with costs, if any, on the ground that the appellant filed the application for a new housing rebate of the GST within the prescribed time limit set out in subsection 256(3) of the Act.

Signed at Ottawa, Canada, this 26th day of July 2002.

"Lucie Lamarre"

J.T.C.C.

Translation certified true

on this 10^th day of November 2003.

Sophie Debbané, Revisor