Citation: 2010 TCC 53
Date: 20100129
Dockets: 2005-4015(GST)G
2006-511(GST)G
BETWEEN:
THE OTTAWA HOSPITAL CORPORATION,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Campbell J.
Introduction:
[1]
These appeals arise as
a result of the failure and/or refusal of the Appellant, a public body, to meet
the requirements placed on it to balance its budget. Following an operational
review commissioned by the Minister of Health and Long Term Care (the “MHLTC”),
temporary control over the Appellant was placed with a supervisor appointed by
the Lieutenant Governor-in-Council for Ontario
(the “LGIC”). This appeal focuses on whether the Appellant is entitled to
a refund of Goods and Services Tax (“GST”) on the goods and services acquired
by it in the course of its activities during this period, as well as a
subsequent period of time.
[2]
The Appellant is a
public hospital governed by the Public Hospitals Act, R.S.O. 1990, c. P.40,
as amended, (the “PHA”) and a corporation governed by the Corporations
Act, R.S.O. 1990, c. C.38, as amended, for the Province. By Order‑in-Council
No. 1704/2001 dated July 16, 2001, the LGIC, acting on the recommendation of
the MHLTC, appointed Dennis Timbrell as supervisor of the Appellant. For the
period of Mr. Timbrell’s appointment, July 16, 2001 to September 30, 2002
(the “Supervisor Period”), as well as a period subsequent to Mr. Timbrell’s
appointment, October 1, 2002 to October 31, 2003 (the “Subsequent Period”),
the Appellant applied for a rebate of 17% of the GST paid during those periods
pursuant to subsection 261(1) of the Excise Tax Act (the “ETA”), R.S.C. 1985, c. E-15, on the basis
that the GST amounts had been paid by mistake. The Appellant and certain other
public service organizations are entitled to rebates for a portion of the GST
which they have paid on some inputs pursuant to section 259 of the ETA. Initially,
the Appellant claimed public sector rebates of 83% of the GST paid pursuant to subsection
259(3) of the ETA. The Appellant is now appealing the denial of GST
claims for the 17% rebate for the Supervisor Period and the Subsequent Period.
[3]
The Appellant, in claiming
the GST rebate amounts, argued that it was either a part of, or an agent of,
the Province of Ontario and, consequently, by virtue of section
125 of the Constitution Act, 1867, 30 & 31 Victoria, c. 3. (U.K.), it was immune from paying the remaining
17% of GST because of Crown immunity.
[4]
The Appellant’s rebate
applications were denied on the following basis:
(a)
The Appellant was
neither a part of, nor an agent of, the Province of Ontario;
(b)
Even if the Appellant
was a Crown agent, it did not have standing to file the rebate applications or
to bring this appeal before the Court; and
(c)
Even if the Appellant
was a Crown agent, its immunity to this claim would be waived pursuant to the
Reciprocal Taxation Agreement (the “RTA”) between the Province of Ontario and the Government of Canada. In addition, the Respondent argued that
the Appellant would not be entitled to claim the rebates paid by mistake because
subsection 262(2) of the ETA prohibits the Appellant from filing a
second claim covering the same subject matter.
Facts:
[5]
The parties filed a Partial
Agreed Statement of Facts and Issues, which I have attached as Schedule “A” to
my Reasons for Judgment.
[6]
By the Spring of 2001,
it became apparent that the Appellant’s continued inability to remain within
its budget required that the MHLTC implement the extreme measure of appointing
a supervisor to oversee the Appellant’s Board of Trustees (the “Board”) and to implement
a long-term recovery plan. Mr. Brian Patterson, the Chief of Staff
for then MHLTC, Tony Clement, described this measure as “kind of the atomic
bomb of control … It was the ultimate control of the Hospital was to eliminate
the executive and the Board and take control of it yourself …” (Transcript,
page 243). On June 29, 2001, correspondence was forwarded to the Board advising
of the MHLTC’s decision to recommend to the LGIC that a supervisor be appointed
pursuant to section 9 of the PHA. The appointment of a supervisor was
recommended after the completion of an operational review of the Appellant by
the Hay Group which contained 127 recommendations.
[7]
On July 16, 2001, the MHLTC
wrote to the Chair of the Board advising that he had recommended the
appointment of a hospital supervisor and that pursuant to an Order-in-Council,
Dennis Timbrell had been appointed. According to the Order‑in-Council,
Mr. Timbrell had “the exclusive right to exercise all of the powers of the
board, The Ottawa Hospital corporation and the members of the corporation” and
the “exclusive right to exercise all the powers of the officers of The Ottawa
Hospital” other than the Chief Executive Officer/President.
[8]
Mr. Timbrell has a long
history in politics, dating back to 1971, as well as with the Ontario health care system. He has held seven different
ministerial portfolios and was Minister of Health from 1977 to 1982. During
this period he oversaw legislative changes to the PHA in respect to the
appointment of inspectors and supervisors of public hospitals.
[9]
Mr. Timbrell’s Terms of
Reference as Supervisor were as follows:
1. The Supervisor will review governance
issues, including the functioning, composition and membership of the board.
2. The President and Chief Executive Officer
of the hospital will continue to manage the day to day operations of the
hospital. Acting as the board of the hospital, the Supervisor will provide
direction to the senior management team as appropriate during the term of the
involvement of the Supervisor.
3. The Supervisor will oversee the implement[at]ion
[of] the MOHLTC approved recovery plan taking into account the recommendations
contained in the Operational Review and in consultation with key internal and
external stakeholders.
4. The Supervisor will fulfill all the
responsibilities of the board, the corporation, its officers (other than the
Chief Executive Officer/President) and members in governing the hospital in
accordance with the Public Hospitals Act, its regulations and all other
applicable legislation.
5. The Supervisor will create an appropriate
advisory body and seek external resources as appropriate.
6. The Supervisor will liaise with the
Assistant Deputy Minister, Health Care programs Division and the Regional
Director, East Region.
7. The Supervisor will report to the Minister
of Health and Long-Term Care.
(Tab 2, Joint Book of Documents)
[10]
Mr. Timbrell described
the financial circumstances of the Appellant at this time as “disastrous” with
the hospital projecting a loss of approximately $250,000.00 per day in the face
of “Having been bailed out the previous year to the tune of 30 or 40 million
and the year before that as well.” (Transcript, page 96).
[11]
Pursuant to his terms
of reference, Mr. Timbrell appointed a small advisory group to identify the
problems with the Appellant, as well as, the direction to be taken. In
addition, he appointed sub-committees for governance, finance, quality and
planning. However, Mr. Timbrell testified that at the end of the day he made
the decisions and that “… for all intents and purposes [he] was the Board”
(Transcript, page 125). Further, Mr. Timbrell testified that he was in constant
and regular contact with the Chief of Staff, Mr. Patterson, who was “the
eyes and ears of the Minister” (Transcript, page 154), throughout his
appointment, including the monitoring phase, the implementation of the recovery
plan and for the 2002‑2003 budget, together with the development of
new hospital by-laws and the recruitment of a new hospital Board. Mr. Timbrell
testified that ultimately, if the MHLTC disagreed with his suggestions, the MHLTC
had the power to veto his proposals.
[12]
Reporting by Mr.
Timbrell to the MHLTC was conducted primarily through the MHLTC’s Chief of
Staff, with most of those meetings being in the form of weekly telephone
conversations. Actual contact with the MHLTC was minimal with three to five
hours of face-to-face meetings over the duration of the 15 month period.
[13]
The Appellant’s CEO,
Dr. J. Kitts, testified that Mr. Timbrell never provided him with instructions
regarding goods and services purchased on behalf of the Appellant. On
cross-examination, Dr. Kitts stated that standing orders and other supply and
utility contracts that pre-dated the Supervisor Period were unaffected by the
appointment of Mr. Timbrell as supervisor.
[14]
Mr. Timbrell remained
in charge of the Appellant for almost 15 months. Immediately following Mr.
Timbrell’s termination by Order-in-Council No. 1675/2002 on September 30,
2002, a new Board of Trustees, appointed by Mr. Timbrell, operated the hospital
for just over a year.
[15]
On an ongoing basis,
the Appellant made applications pursuant to subsection 259(3) of the ETA
for public service body (“PSB”) rebates of GST equal to 83% of the GST paid in
the period in respect of its purchases of taxable goods and services. These
applications were assessed and paid to the Appellant. On December 1, 2003 and
January 19, 2004, the Appellant made two applications for further GST rebates
pursuant to subsection 261(1) of the ETA, one for the Supervisor Period
in the amount of $1,704,984.55 and one for the Subsequent Period in the
amount of $1,582,291.00. Both of these applications requested an additional 17%
rebate of GST paid during the relevant periods. The Appellant’s rebate
applications for both the Supervisor Period and the Subsequent Period were
denied.
[16]
The Appellant has
conceded that its claim for the period July 16, 2001 to November 30, 2001 is
statute barred under subsection 261(3) of the ETA.
[17]
The following are the
issues to be decided in this appeal:
(i)
Whether the Appellant
was part of, or an agent of, the Crown during the Supervisor Period;
(ii)
Whether the Appellant
was part of, or an agent of, the Crown during the Subsequent Period;
(iii)
If the Appellant was a
part of, or an agent of, the Crown during the Supervisor Period and/or the
Subsequent Period, whether it had standing to file the Rebate Applications that
are the subject of these appeals and whether it has standing to appeal to the
Tax Court of Canada in respect of a claim for Crown immunity;
(iv)
If the Appellant was a
part of, or an agent of, the Crown during the Supervisor Period and/or the
Subsequent Period, whether its immunity from federal tax under section 125 of
the Constitution Act, 1867 was waived pursuant to a reciprocal taxation
agreement entered into between the Government of Canada, represented by the
federal Minister of Finance, and the Government of Ontario, represented by
Ontario’s Minister of Finance, effective July 1, 2000; and
(v)
Whether the Appellant
is precluded by sections 262, 297, 299 and 306 and subsection 301(1.1) of
the ETA from claiming the rebates of GST paid by mistake.
Crown Agency:
[18]
(i) Whether the
Appellant was part of, or an agent of, the Crown during the Supervisor Period;
and
(ii) Whether the Appellant
was part of, or an agent of, the Crown during the Subsequent Period.
The Appellant’s Position:
[19]
The Appellant argued
that although it was not an agent of the Crown by virtue of a statute, at
common law it was part of, or an agent of, the Crown, the MHLTC, during both
the Supervisor Period and the Subsequent Period. The Appellant relied on R.
v. Eldorado Nuclear Ltd., [1983] 2 S.C.R. 551, to argue that agency is
established by looking to the control test and that this test is based on the
degree of control that the Crown is legally entitled to exercise (de jure
control) and not on the degree of control that is in fact exercised (de
facto control).
[20]
The Appellant’s
position is that the powers given to the MHLTC under the PHA are
extensive. These powers can be exercised over the Appellant even in periods
where no supervisor is appointed. Once a supervisor is appointed, the MHLTC and/or
the LGIC have the ability to exercise complete control over the Appellant
through the office of the hospital supervisor. Consequently, the powers
bestowed upon the MHLTC under the provisions of the PHA, combined with
the ability to appoint and exercise complete authority over a hospital
supervisor, make the Appellant an agent of the Crown both during the Supervisor
Period and the Subsequent Period.
The Respondent’s Position:
[21]
The Appellant cannot be
an integral part of, or an agent of, the Crown. It has a separate corporate
existence and governance from the Ministry of Health and Long Term Care (the
“Ministry”). Neither the Ministry of Health and Long Term Care Act,
R.S.O. 1990 c. M.26 (the “MOHLTCA”) nor the PHA designate
the Appellant as a part of the Ministry. The Respondent pointed to a number of
provisions in the MOHLTCA and the PHA that are incompatible with
a finding that the Appellant is part of the Ministry: the Ministry’s business
is conducted by employees appointed under Ontario’s Public Service Act,
R.S.O. 1990, c. P.47, but the Appellant’s staff are not; where the government
intends for a hospital to be part of the Ministry, it does so expressly; the
primary functions of each are different; the Ministry’s business plans describe
hospitals as independent corporations run by independent boards; the Ministry
has no reversionary interest in the Appellant’s property; and the
Order-in-Council appointing the supervisor did not change the Appellant’s legal
status. Therefore, there is no statutory support to conclude that the
Appellant is a part of the Crown. The Respondent relied on the test set out by
the Supreme Court of Canada in Halifax (City) v. Halifax Harbour
Commissioner, [1935] S.C.R. 215, to support its position that the Appellant
was not a Crown agent at common law when the control test factors were applied.
The Appellant never held itself out to be an agent and was not an agent when
acquiring goods and services. In operating the hospital, it carried on its own
business, owned its own property and had its own employees throughout.
Analysis – Crown Agency:
[22]
A public body may
either be expressly designated to be an agent of the Crown by statute or
treated as an agent at common law because it satisfies the common law control
test when various factors are considered. The Appellant in these appeals does
not claim that it was a statutory Crown agent (paragraph 18, Appellant’s Memorandum
of Fact and Law). The Supreme Court in the Halifax Harbour Commissioner
case discussed the test for determining whether a public body will be treated
as an agent of the Crown at common law. The Court looked at the “… nature of
the powers and duties of the respondents …” (page 226).
[23]
The Supreme Court
revisited this test in Westeel-Rosco Ltd. v. South Saskatchewan
Hospital Centre, [1977] 2 S.C.R. 238, and stated at pages 249‑250:
Whether or not a particular body is an agent of the Crown depends
upon the nature and degree of control which the Crown exercises over it. …
[24]
The Court goes on at
page 250 to quote R. v. Ontario Labour Relations Board, Ex p. Ontario Food Terminal Board, (1963), 38 D.L.R. (2d) 530:
It is not possible for me to formulate a comprehensive and accurate
test applicable in all cases to determine with certainty whether or not an
entity is a Crown agent. The answer to that question depends in part upon the
nature of the functions performed and for whose benefit the service is
rendered. It depends in part upon the nature and extent of the powers entrusted
to it. It depends mainly upon the nature and degree of control exercisable or
retained by the Crown.
[25]
This test has been
summarized by Professors Hogg and Monahan in Liability of the Crown,
3rd Edition, Carswell, 2000, at page 334, as follows:
… If the corporation is controlled by a Minister (or cabinet) in
much the same way as a government department is controlled, then the
corporation is an agent of the Crown. If, on the other hand, the corporation is
largely free of ministerial control, then it is not an agent of the Crown.
[26]
The test was similarly
summarized by the Supreme Court of Canada in Eldorado Nuclear, at pages
573-574, in the following manner:
… At common law the question whether a person is an agent or servant
of the Crown depends on the degree of control which the Crown, through its
ministers, can exercise over the performance of his or its duties. The greater
control, the more likely it is that the person will be recognized as a Crown
agent. Where a person, human or corporate, exercises substantial discretion,
independent of ministerial control, the common law denies Crown agency status.
The question is not how much independence the person has in fact, but how much
he can assert by reason of the terms of appointment and nature of the official:
Bank voor Handel en Scheepvaart N.V. v. Administrator of Hungarian Property,
[1954] A.C. 584 at pp. 616-17, and see Hogg, Liability of the Crown,
1971, p. 207. …
[27]
Ultimately the
essential element in the control test is de jure control as opposed to de
facto control. Consequently, the relevant degree of control is that which
the Minister is legally entitled to exercise over the particular body or
institution and not the degree of control that is in actual fact exercised. The
Court in Eldorado Nuclear stated at page 574:
The position at common law is not that those under de jure
control are entitled to Crown immunity, but rather that immunity extends to
those acting on behalf of the Crown … Nevertheless, it does indicate that the de
jure test applies only in the absence of specific language indicating the
body acts on behalf of or as an agent of the Crown. …
[28]
According to Professors
Hogg and Monahan in Liability of the Crown, the question will be
resolved by examining the body’s empowering statute and will not involve an
assessment of the actual relationship between the particular body and the
government (page 336).
[29]
Like many areas of the
law, this is fraught with uncertainties. The line between those bodies that
will be considered Crown agents at common law and those that will not is
anything but precise. There is “some uncertainty over just what degree of
governmental control will be sufficient to create Crown agent status” (Crown
Agent Status, by Robert Flannigan, Canadian Bar Review, (1988) 67 Can.
Bar Rev. 229 at page 231). However, at pages 573-574 of Eldorado Nuclear,
J. Dickson stated:
… Where a person, human or corporate, exercises substantial
discretion, independent of ministerial control, the common law denies Crown
agency status. …
The previously referred to article, Crown Agent
Status, relies on the reasoning in Eldorado Nuclear and at page 249
draws the line as follows:
… This would appear to suggest that anything less than substantial
discretion will result in a Crown agent characterization. In other words, any significant
government control, even though it could not be said to be substantial
control, would be sufficient to establish a Crown agency. If that is so, the
precise degree of control required is significant control …
[30]
Tracing the application
of the control test prior to the Halifax Harbour Commissioner case
requires a step back in time to the case of Fox v. Government of
Newfoundland, [1898] A.C. 667, where the Privy Council considered whether
balances in the books of a bank to the credit of various local boards administering
education in the Colony were debts to which Crown priority applied. The
educational board was found not to be a Crown agent because the board had
independent discretion as to the application and expenditure of its resources.
[31]
The Privy Council
reached a similar decision in Metropolitan Meat Industry Board v. Sheedy,
[1927] A.C. 899. Despite the fact that the Governor-in-Council appointed board
members and could veto certain board actions, the Metropolitan Meat
Industry Board (“MMIB”) was nevertheless held not to be a Crown agent. At page
905, the Court stated:
… They are a body with discretionary powers of their own. Even if a
Minister of the Crown has power to interfere with them, there is nothing in the
statute which makes the acts of administration his as distinguished from
theirs. …
The Court focused on the fact that the act
constituting the MMIB conferred wide powers on the board and these powers could
be exercised at the board’s own discretion, without consulting Crown
representatives. The Court listed those board powers as including the ability
of the MMIB to acquire land, construct abattoirs and works, sell cattle and
meat and lease property. The Court also noted that the MMIB did not pay its
receipts into the general revenues of the State.
[32]
Similarly, in Tamlin
v. Hannaford, [1950] 1 K.B. 18, Lord Denning held that the British Transport
Commission was not a Crown agent because its servants were not civil servants,
the property was not that of the Crown and the exercise of control by the
Minister of Transport was insufficient to meet the requisite standard.
[33]
The Exchequer Court in University
of Toronto v. Minister of National Revenue, (1950) 50 D.T.C. 738 (Ex.
Ct.), also utilized the control test in considering whether the governors of
the University of Toronto were an agent of the Crown so as to exempt the monies
passing to this body from succession taxes. Pursuant to the University Act,
R.S.O. 1937, c. 372, the board, as the governing body of the University of
Toronto, had the power to appoint servants and hire employees, to fix student
fees, regulate and manage residences and dining halls, invest money, purchase
and erect buildings with approval of the LGIC, administer its property and endowments
and to receive income and make expenditures. The appeal was dismissed and the
Board of Governors could not claim an exemption as an agent of the Province of Ontario. The LGIC’s powers were primarily of a financial nature, but they did
not operate to restrict the governors’ independence when they were conducting
the affairs of the university.
[34]
In applying the control
test in Westeel-Rosco, the Supreme Court first examined the relevant act
constituting the appellant in that case, the South Saskatchewan Hospital
Centre Act, R.S.S. 1965, c. 254. The Court, at pages 251‑252,
noted that the hospital board was “endowed with wide powers for the
construction and administration of the [South Saskatchewan] Hospital”. Those
provisions included: the ability, with the permission of the LGIC, to purchase,
lease and sell land and construct or acquire other buildings; to enter into agreements
to operate hospital facilities and management; to receive funds from the Crown;
to make rules relating to the operation and management of the hospital; to
borrow money; to allow the Legislature to appropriate funds for hospital
maintenance and board expenses; and to have the hospital audited and to have
the hospital report on its finances to the Minister of Public Health. The Court
at page 253 concluded:
… the powers with which the Board is endowed are far removed from
those of a Crown agency which is subject at every turn to the control of the
Crown in executing its powers as was the case with the Halifax Harbour
Commissioners …
The Supreme Court concluded that the powers of the
hospital board were “more analogous to those of the Metropolitan Meat Industry
Board”, which was held not to be a Crown agent. It should be noted, however,
that at the time of the Westeel‑Rosco decision, the Province of Saskatchewan had no legislation providing for the appointment of a
supervisor.
[35]
More recently, in Toronto
District School Board v. Canada, [2009] T.C.J. No. 25, C. Miller
J. considered a situation involving the appointment of a supervisor under the Education
Act, R.S.O. 1990, c. E.2, for Ontario to oversee the Toronto District
School Board (the “TDSB”). C. Miller J. focused on whether GST was a tax on
lands or property belonging to the Province of Ontario;
in other words, whether the province became the owner of the TDSB’s property.
The Court held that, although TDSB was an agent of the Crown during the vesting
order period, TDSB’s authority as a Crown agent under the Education Act
did not extend to make the property, including TDSB’s funds used to acquire
property and services, the property of the province. Consequently, C. Miller J.
concluded that TDSB became a Crown agent in order to subject its affairs to
control by the province, but not to divest itself of all its property.
[36]
The Federal Court of
Appeal upheld this decision ([2009] F.C.J. No. 1422) based on the fact
that the TDSB was not acting as a common law or statutory Crown agent.
[37]
The Toronto District
School Board decisions of both the Tax Court and Federal Court of Appeal
merit further discussion as I requested counsel for both parties to present
written submissions on this appeal subsequent to the Federal Court of
Appeal rendering its decision. However, I intend firstly to provide my reasons
for concluding that the Appellant’s principal argument that it is not part of,
or an agent of, the Crown must fail.
[38]
A finding that a body
is a common law Crown agent is made only in exceptional cases after a rigorous
application of the relevant test. As Lord Denning stated in Tamlin v.
Hannaford, at page 25:
… When Parliament intends that a new corporation should act on
behalf of the Crown, it as a rule says so expressly …
This is particularly applicable in the Province of Ontario where provincial legislation is replete
with statutes that establish bodies and then expressly designate them as Crown
agencies.
[39]
There are a number of
factors in this appeal that militate against a finding of the control essential
to concluding that an agency relationship existed at common law. The Appellant
is established pursuant to the PHA. There is no statutory provision, in
either the MOHLTCA or the PHA, which designates the Appellant as
part of the Ministry. Furthermore, as the Respondent pointed out, where the
Ministry wishes to include separate entities, such as District Health Councils
or psychiatric hospitals, as part of the Ministry, it expressly states that
intention (Reciprocal Taxation Agreement, Joint Book of Documents, Tab 21). As
noted in Tamlin v. Hannaford, at page 25, in the:
… absence of any such express provision [designating the body a
Crown agent by statute], the proper inference, in the case, at any rate, of a
commercial corporation, is that it acts on its own behalf, even though it is
controlled by a government department.
Therefore, if the Appellant is to be a Crown agent,
the Crown must be found to exercise the requisite degree of control over the
Appellant at common law.
[40]
As explained by Mr.
Timbrell, in testifying respecting the origin of the current hospital system,
historically hospitals such as the Appellant were viewed as autonomous and
somewhat independent of government. The enactment of supervisory legislation
and its implementation at the Appellant’s facilities did not constitute a
change to this role for the Appellant. The supervisory legislation was
described as an incremental change of a rarely invoked power. The roles of the
Appellant and the Ministry are very different in nature. The Appellant does not
carry on the business of the Ministry but rather the Ministry has delegated to
the Appellant the authority to deliver health care to the Ottawa region as its own business (Cross-examination of Mr.
Patterson; direct examination of J. McKinley).
[41]
The Appellant argued
that the Ministry is legally entitled to exercise a high degree of control over
the Appellant even in periods when a hospital supervisor has not been
appointed. To support this position, the Appellant argued that the MHLTC’s
approval was required to amalgamate; to add additional buildings and
facilities; to sell, lease, mortgage or dispose of land; to continue to run as
a hospital; and to dissolve. In addition, most of the financial assistance upon
which the Appellant relied came from the Ministry and the Ministry could
appoint provincial hospital representatives to the Appellant’s Board. However,
many of these factors are the same factors considered in the Westeel-Rosco
decision (the power to continue to operate and the ability to sell, lease
and add additional buildings with Crown approval) where the Supreme Court held
that the hospital board was not a Crown agent. In contrast to the facts in Westeel-Rosco,
the Appellant is not subject to an annual audit and the Board is not regularly
appointed by the LGIC. While these two factors would indicate an even greater
degree of control over the body in question, the Court rejected the argument
that the hospital board was a Crown agent in that case.
[42]
In Townsville
Hospitals Board v. Townsville City Council, (1982) 149 CLR 282, a
decision of the High Court of Australia, the issue was whether a hospital board
enjoys Crown immunity in constructing a building on Crown land. The Court held
that, although the hospital board was subject to stringent controls in relation
to the construction of the building, it nonetheless retained independent
discretion to decide whether to engage in such work and therefore this meant
that the board was independent of the Crown. At paragraph 15, the Court
stated the following:
15. It has
more than once been said in this Court that "there is evidence of a strong
tendency to regard a statutory corporation formed to carry on public functions
as distinct from the Crown unless parliament has by express provision given it
the character of a servant of the Crown": Launceston Corporation v.
Hydro-Electric Commission [1959] HCA 12; (1959) 100 CLR 654, at p 662 ; State
Electricity Commission (Vict.) v. City of South Melbourne [1968] HCA 49;
(1968) 118 CLR 504, at p 510 . All persons should prima facie be regarded as
equal before the law, and no statutory body should be accorded special
privileges and immunities unless it clearly appears that it was the intention
of the legislature to confer them. It is not difficult for the legislature to
provide in express terms that a corporation shall have the privileges and
immunities of the Crown, and where it does not do so it should not readily be
concluded that it had that intention. The Hospitals Act does not expressly
provide that a board shall have the privileges and immunities of the Crown when
engaging in building operations, and in my opinion it does not impliedly so
provide. The fact that a number of Ministerial approvals must be obtained if
the Board needs to borrow or raise money or make financial arrangements for the
purposes of a proposed work does not indicate that the Board in carrying out
the work is acting for the Crown. The Board cannot be directed to do the work,
and if it does borrow or raise money for the purpose, the Board and not the
Crown is liable in case of default. Although in some respects a hospitals board
is subject to stricter controls than those which governed the statutory bodies
in Metropolitan Meat Industry Board v. Sheedy (1972) AC 899 ; Grain
Elevators Board (Vict.) v. Dunmunkle Corporation [1946] HCA 13; (1946) 73
CLR 70 and the Gladstone Town Council v. Gladstone Harbour Board (1964)
QdR 505 , there is in my opinion no ground of distinction between the present
case and those cases. (at p292)
Although this is the view of the Court with respect to
Australian law, it appears consistent with the Canadian approach.
[43]
The Appellant argued
that it was a Crown agent during the Supervisor Period because the hospital
supervisor, Mr. Timbrell, exercised all of the powers of the Board, reported to
and took direction from the MHLTC and was obligated to carry out the Minister’s
directions. These powers are granted to the supervisor pursuant to the PHA.
However, as the Respondent noted, there is nothing in the PHA that makes
the supervisor’s acts those of the MHLTC, and to the contrary, those remain the
acts of the hospital for whose board the supervisor acts as per subsection 9(5)
of the PHA (Respondent’s Written Submissions, page 19). The proposition
of not adopting the acts of the body was referenced in the Metropolitan Meat
Industry Board case where the Court stated at page 905:
… Even if a Minister of the Crown has power to interfere with [the
acts], there is nothing in the statute which makes the acts of administration
his as distinguished from theirs. …
The Federal Court of Appeal in Toronto District
School Board also made reference to this fact.
[44]
While the control test
focuses on the amount of control that can be exercised and not what was
exercised, for completeness I will review the actual control exercised during
the Supervisor Period. Mr. Timbrell, as supervisor, had substantial discretion
in respect to the Appellant’s operation. Aside from the fact that he was
appointed by the Ministry and continued to brief the Ministry throughout, he
received few, if any, specific instructions to perform or carry out any
particular act. In fact, when invited on cross-examination to explain how the MHLTC
more closely controlled the hospital during this Period, Mr. Timbrell referred
only to the attempts to re-start funding for capital projects (Transcript, page
192). To the extent that the hospital received instructions from the Ministry
during the periods under appeal, those instructions were no different than the
kinds of instruction provided to other hospitals not under supervision
(Discovery Read‑Ins of J. Kitts, q. 52-53). The Appellant’s Board was not
appointed by the LGIC. Even when the supervisor appointed the new Board, he
exercised his own discretion in the selection process. In fact, Mr. Timbrell
refused to commit to a Francophone quota when he selected the new Board (J.
Kitts, q. 162-163). Both before and after the period in dispute, the Board
would have retained substantial discretion in determining how the hospital
would operate. The hospital’s financial reporting remained unchanged during the
periods under appeal and was not consolidated with the financial statements of
the province (Direct examination and cross-examination of J. McKinley). The
Appellant’s employees were not public servants and were not bound by provincial
public service statutes (Direct examination of J. McKinley and
cross-examination of J. Kitts). At all times, the Appellant maintained its
separate corporate status. The Appellant was not required to obtain ministerial
approval to pass by-laws. In fact, the requirement to have such approval was
removed as part of the legislation that allowed supervisors to exercise the
powers of a hospital board. The power to amend by-laws rested with the Board
and not the Minister (Direct examination of D. Timbrell; by-law Tab 15, section 12.1,
Joint Book of Documents).
[45]
In Eldridge v.
British Columbia (A.G.), [1997] 3 S.C.R. 624, the Court held that a B.C.
hospital was subject to the Charter of Rights and Freedoms, but only in
respect to the actual delivery of health care services and not in respect to
the internal management of the hospital. This case is instructive because the B.C. Hospital
Act (R.S.B.C. 1996, c. 200) contained provisions which are as restrictive
as, or perhaps more restrictive than, the provisions contained in the PHA.
For example, the Lieutenant Governor-in-Council in Eldridge appointed 14 of
the 16 board members and could have a representative on the board, all by‑laws
had to be approved before becoming effective and the Minister could compel the
passage of by-laws.
[46]
In summary, the Appellant
is not a Crown agent. It carries on its own business, that is, the operation of
the hospital. It does not carry on the business of the Ministry. It has broad
discretion in carrying out its mandate, owns its own property, employs its own
staff and makes its own decisions. It enjoys relatively more autonomy than
other bodies which have nevertheless been held by the Courts not to be Crown
agents. Since the hospital board is not a Crown agent, then it is not possible
for the supervisor to be an agent where he is subject to the same degree of
control. The fact that the PHA provisions require that the supervisor
report to the MHLTC or to carry out the MHLTC’s directions under
subsections 9(9) and 9(11), respectively, does not change the result.
[47]
Even if it could be
said that the Appellant was an agent of the Crown for some purposes, it acted
on its own account with respect to its internal management and procurement of
goods and supplies. This approach is consistent with the decisions in Cloutier
v. Science Council of Canada, [1995] O.J. No. 4893 (Div. Ct.)
and Ontario Realty Corp. v. P. Gabriele & Sons Ltd., [2000] O.J. No. 3270
(Sup. Ct.). In Cloutier, at paragraphs 48-51,
it was held that where a person, even a Crown agent, enters into an arrangement
(in that case an employment relationship) in its own name, it does not carry
with it all the prerogative rights and immunities of the Crown. In such cases,
the Courts examine the relevant statutory and factual framework to determine in
what capacity the body in question is acting. The facts before me in these
appeals, together with the statutory provisions, support that suppliers
provided goods and services to the Appellant and not to the Crown. For example,
the lands and property of the Appellant, including taxable supplies purchased
during the periods in dispute, were at all times vested in the Appellant and
not the Crown. The Appellant never held itself out or represented to third
parties, such as suppliers, that it was a Crown agent. It never completed GST
exemption forms when purchasing taxable supplies. The evidence was that the
Appellant had pre-existing standing orders for the routine procurement of
supplies. The procurement procedures did not change when Mr. Timbrell was
appointed and supplies continued to be procured under those agreements. Those
standing orders were arrangements of the Appellant to acquire goods and
services on its own account. This conclusion is consistent with the decision in
Ontario Realty Corp., where the plaintiff was held to be an agent
of the Crown for the purposes of contracting, in part, because it held itself
out as being exempt from the payment of GST. Further, Mr. Timbrell never
reported back to the Ministry concerning the routine procurement of goods and
services during the meetings and he did not receive instructions from the
Ministry in respect to the procurement of goods and services. The Appellant is
not an agent for the purpose of procuring goods and services as it never held
itself out as an agent, it received no instructions of any kind from the
Ministry with respect to procurement and it provided no feedback to the
Ministry regarding procurement.
[48]
With respect to the
Appellant’s argument that the Appellant was also a Crown agent during the
Subsequent Period, the fact that the Board was appointed during the Subsequent
Period is not relevant as the PHA contained no special provisions that
would give the MHLTC the ability to legally exercise more control over this
type of board. Therefore, since I have concluded that the hospital board is not
a Crown agent, a hospital board that was appointed by the supervisor,
Mr. Timbrell, cannot be a Crown agent.
The Decision in Toronto District School Board:
[49]
I have considered the
parties’ written submissions on the impact upon the outcome of the present
appeal with respect to the Federal Court of Appeal and the Tax Court of Canada
decisions in the above-noted matter. My conclusions respecting the Agency issue,
however, remain unchanged.
[50]
C. Miller J. did not
discuss the Crown agency issue to any great extent in his reasons except to
state, at paragraph 30, that the emphasis on Crown agency by counsel was
misplaced and that the real focus was on “… whether in the circumstances the GST
was a tax on lands or property belonging to Ontario”.
[51]
The Federal Court of
Appeal in affirming C. Miller J.’s decision in dismissing the Appellant’s
appeal, clearly had an opposing view on the agency issue and stated at
paragraph 4:
We are all of the view that the Judge committed no
reversible error in dismissing the Board's appeal. However we would base the
decision on the ground that the Board was at no time acting as a common law or
statutory agent of the Crown.
[52]
The Appellant submits
that there are both factual and legal distinctions between the decision in Toronto
District School Board and the present appeal. First, the Appellant argued
that the Education Act in Toronto District School Board contained
a so-called anti-agency provision (section 257.43), while no such
provision was contained in the PHA. Second, the Appellant submitted that
the MHLTC can exercise more control over a hospital supervisor than the control
that could be exercised by the Minister of Education when he appoints a
supervisor.
[53]
Section 257.43 of the Education
Act states:
257.43 Where a board
has become subject to an order made under subsection 257.31 (2) or (3),
all things done by or for the Minister under this Division in relation to the
affairs of the board shall for all purposes be deemed to have been done by and for the board
and in its name.
[54]
While it may be
possible through clear statutory language to deem a body, that is otherwise a
Crown agent at common law, not to be an agent for legislative purposes, the
language in section 257.43 does not appear to be sufficient on its own, as this
provision simply deems the acts of a supervisor to be acts of the school board.
With respect to this provision, at paragraph 6, the Federal Court of Appeal in Toronto
District School Board stated:
That the Board was not the agent of the Crown during the
period that the Supervisor was conducting its affairs is made clear by
section 257.43 of the Education Act. …
(Emphasis added)
[55]
I do not infer from
this quote that the Federal Court of Appeal considered section 257.43 to be an
anti-agency provision. In fact, it appears that in stating that the school board
in Toronto District School Board is not a Crown agent, although the
Court gave no specific reasons for its conclusion, that its finding of
non-agency is not affected even though a supervisor had control over the school
board for a period of time. Further, the fact that the Federal Court of
Appeal’s reference to section 257.43 appears after their conclusion on agency
indicates that their decision was simply strengthened by this provision.
[56]
While the Appellant
suggested that the Federal Court of Appeal in Toronto District School
Board did not consider all of the provisions of the Education Act as
these were not brought to the Court’s attention, I do not believe it is for me
to speculate on what the Court did or did not do when the entire Education Act
was before it as the PHA is before me in the present appeals. I simply
have to assume that the Court did review the statutory provisions of the Education Act
in their entirety in applying the common law agency test and concluding that
the supervisor was not a Crown agent at common law.
[57]
On my review of the
evidence and of the statutory provisions of the PHA, I see no intent by
the government to alter the status of the Appellant hospital and the autonomy
it enjoyed. The temporary interference with that autonomy did not convert the
business of the Appellant hospital into a business operated by the Crown. This
is consistent with the Federal Court of Appeal conclusions in Toronto District
School Board that the legislation did not make the school board a Crown
agent while a supervisor had conduct of the board’s affairs. On a reading of
the decision, I conclude that this was the primary basis for the Federal Court
of Appeal’s conclusion and that it was simply supported by the application of
section 257.43 of the Education Act.
[58]
Although counsel for
the Appellant suggested a number of distinctions between the present appeal and
the Toronto District School Board decision, I am not persuaded that the
requisite elements for Crown agency exist in the appeal before me.
[59]
The Respondent proposed
three alternative arguments for consideration in the event that I concluded
that the Appellant was a part of, or an agent of, the Crown during either or
both of the periods under appeal. Although I have decided the Appellant was not
an agent and I am therefore not obliged to consider these alternative
arguments, I intend to address them briefly as both sets of counsel were well prepared
and spent considerable time on these arguments.
Standing:
[60]
If the Appellant was a
part of, or an agent of, the Crown during the Supervisor Period and/or the
Subsequent Period, whether it had standing to file the rebate applications that
are the subject of these appeals and whether it has standing to appeal to the
Tax Court of Canada in respect of a claim for Crown immunity.
Appellant’s Position:
[61]
The Appellant has
standing to file the rebate applications and to bring its appeal to this Court because
the rebate applications are in respect of a federal statute that this Court has
jurisdiction over and the issue of Crown immunity is a question of law for the
Courts to decide. Therefore, the Appellant has standing as of right to bring
the appeals because it is specifically affected by the denial of the rebates.
Consequently, there is a direct causal relationship between the Appellant’s
pecuniary loss and the Respondent’s denial of the rebates (Appellant’s Memorandum
of Fact and Law, pages 12-14).
Respondent’s Position:
[62]
The Appellant has no
such standing because Crown immunity belongs to the Province of Ontario and only the Attorney General has the ability to
conduct litigation for and against the Provincial Crown or its agencies. A
Crown agent that litigates a matter must add the Attorney General as a party.
Subject to certain exceptions, the Ontario Realty Corp. case states that
where a party contracts as an agent on behalf of the principal, the contract is
that of the principal and not the agent and only the principal may sue or be
sued on the contract. The Respondent relied on the Federal Court of Appeal
decisions in West Windsor Urgent Care Centre Inc. v. The Queen, [2008]
F.C.J. No. 24, and United Parcel Service Canada Ltd. v. The Queen,
[2008] F.C.J. No. 178, to support the general prohibition on having an agent
bring a claim (Respondent’s Written Submissions, pages 21‑22).
Analysis - Standing:
[63]
Counsel for both
parties focused on the concept of Crown immunity. However, the focus here
should really be on a consideration of those decisions which have dealt with
section 261 of the ETA. Hershfield J. in West Windsor Urgent Care Centre Inc. v. The Queen, [2005] T.C.J. No. 564, considered the
general agency principle that the principal, and not the agent, should bring
the action. The Court held, at paragraph 64, that a clinic did not have
standing pursuant to section 261, nor could it be considered an agent of its
principal (the physicians), partly because it is “… generally accepted
that a principal’s cause of action cannot be advanced by its agent”. The Federal
Court of Appeal, in affirming the decision, stated, at paragraph 1, that there
was “… no reviewable error in concluding that the appellant had no standing to seek
a rebate under section 261 …”.
[64]
However, in the recent
Supreme Court of Canada decision in United Parcel Service Canada Ltd. v. The
Queen, [2009] S.C.J. No. 20, the Court in considering whether the Appellant
was entitled to a GST refund under section 261 focused on the phrase “has
paid an amount”. The Court interpreted this phrase as referring to the person
who had actually paid the amount, whether or not that person was the person who
had the legal liability to pay the GST amount. This decision supports the
proposition that it is the Appellant in this appeal that would be entitled to a
refund pursuant to section 261, since the Appellant paid the GST. This would be
the case whether or not the Appellant was acting as an agent for the Crown.
Following the Supreme Court decision in United Parcel Service leads to
the conclusion that in the present appeal the Appellant would have standing to
bring the action whether or not it is a Crown agent.
Reciprocal Taxation Agreement:
[65]
If the Appellant was a
part of, or an agent of, the Crown during the Supervisor Period and/or the
Subsequent Period, whether its immunity from federal tax under section 125 of
the Constitution Act, 1867 was waived pursuant to the RTA entered into between
the Government of Canada and the Government of Ontario, effective July 1, 2000.
Analysis - Reciprocal Taxation Agreement:
[66]
The RTA basically
states that all provincial Crown corporations shall pay GST on their purchases
unless they are listed in the Schedule “A” annexed to the agreement. The RTA
purports to bind Canada, the Province
of Ontario, and their agents. The Appellant argued
that this Court does not have jurisdiction to apply the RTA since it is limited
to dealing with matters arising under Part IX of the ETA pursuant to
subsection 12(1) of the Tax Court of Canada Act, R.S.C. 1985, c. T-2.
The Appellant also argued that this Court does not have jurisdiction because if
it did apply the RTA, it would extend the powers of this Court to persons not
within the express jurisdiction of the Court (Appellant’s Memorandum of Fact
and Law, page 17).
[67]
Other than the comments
of C. Miller J. in Toronto District School Board respecting the
application of the RTA and this Court’s jurisdiction to interpret an agreement
between the Federal and Provincial governments, neither party provided me with
any other caselaw respecting this issue nor could I locate any caselaw from
this Court dealing directly with this issue. While C. Miller J.’s comments are obiter,
he stated, at paragraph 50, of his Reasons:
… I presume the parties believe
that the correct procedure, had I found the TDSB could successfully claim
immunity from taxation (without reference to the Reciprocal Taxation Agreement)
was for the parties to then arbitrate the matter for an interpretation of the
Reciprocal Taxation Agreement, to determine if it waived such immunity for the
TDSB. I would have happily run the risk of short-cutting such unnecessary and
prolonged litigation by grabbing the contract by the horns and giving it an
interpretation that I suggest is clear on its face: the TDSB is not on Schedule
A and it is, therefore, not immune from taxation and the assessment was
therefore correct.
While my comments in this regard are also obiter,
I agree with C. Miller J. Although the Appellant submitted that this Court does
not have jurisdiction to apply the provisions of the RTA in a manner that would
extend the application of a taxing statute beyond its express scope, I conclude
that this agreement is no different in nature than any other agreement that
this Court must interpret and apply in the circumstances of any appeal. The Appellant
is clearly incorrect in suggesting that if this Court interpreted the RTA it
would be expressly extending the application of Part IX of the ETA
because section 122 makes Part IX applicable to and binding on both Her Majesty
in Right of Canada and Her Majesty in Right of the Province. If I had concluded
that the Appellant had been a Crown agent during these periods under appeal and
therefore immune from taxation and entitled to its rebate claim, I would have
pursued an interpretation of the RTA in order to ascertain if immunity from
taxation was waived by virtue of this agreement. Like C. Miller J., logic
dictates and because the agreement appears clear on its face, I would have
concluded that since the Appellant is not listed in Schedule “A” to the RTA, it
is required to pay GST. According to the RTA, all Provincial Crown corporations
and agencies shall pay GST unless they are on Schedule “A”. The inclusion of
eight Ontario psychiatric hospitals on Schedule “A” clearly precludes all other
Ontario hospitals, including the Appellant.
Filing of Second Rebate Claim:
[68]
Whether the Appellant
is precluded by sections 262, 297, 299 and 306 and subsection 301(1.1) of the ETA
from claiming the rebates of GST paid by mistake.
Appellant’s Position:
[69]
Rebate applications for
GST are governed by section 261 of the ETA and are therefore not
precluded under subsection 262(2). The Appellant suggested that the case of Fanshawe
College of Applied Arts & Technology v. The Queen, [2006] T.C.J. No. 504, which denied a
claim for a rebate of GST paid by mistake, should be distinguished because the
taxpayer in Fanshawe College was firstly, trying to recoup an aggregate
of 167% of the GST originally paid (which the Appellant in this appeal was not
attempting to do) and, secondly, that the word “supply” rather than “matter”
should have been used in the wording of subsection 262(2) if Parliament
had intended to limit the meaning of “matter” in this provision. Woods J. in Fanshawe College held that the word “matter” means “a transaction giving rise to the
incidence of GST”.
[70]
The Appellant suggests
two additional textual interpretations that the word “matter” could have. The
Appellant suggests the word “matter” could mean “the amount of the rebate
claimed” or “the statutory basis for a rebate claim”. Pursuant to these
interpretations, the Appellant’s rebate applications under subsection 261(1)
concern a matter distinct from its rebate applications under subsection 259(3)
and would not be precluded by subsection 262(2). Since the ETA consistently
uses the word “supply” to refer to a transaction that gives rise to GST, then
the word “matter” must refer to something else, that is, something different
from the transaction giving rise to the payment of GST. This makes the textual
interpretation of “matter” ambiguous.
[71]
In respect of the
applicable limitation period, the Appellant submits that section 262 implies
that it should be interpreted together with the provisions dealing with
Division PSB rebates including applicable objection and appeal provisions,
which would imply a two year limitation period (as per subsection 261(3)) and
not a 90 day period (as per subsection 301(1.1)). If Parliament had intended
that the 90 day limitation period for an objection in subsection 301(1.1)
apply, rather than the two year limitation period set out in subsection 261(3),
then it would have included a reference to section 297 in subsection 261(2) in
addition to the section 296 reference. Lack of such a reference in
subsection 261(2) suggests that the two year limitation period in
subsection 261(3) applies. In addition, the spirit and purpose of the ETA
support the application of the two year limitation period for claiming rebates.
Respondent’s Position:
[72]
The Appellant’s claim
for the GST amounts paid in error is prohibited by subsection 262(2) of the ETA
because they cover the same subject matter as the Appellant’s PSB rebate claim
of 83% of the GST paid during the Supervisor Period and the Subsequent Period.
Therefore, the restriction in subsection 262(2), that only one application may
be made for a rebate with respect to any matter, prevents the Appellant from
filing a claim to recover the remaining 17%. Subsection 262(2) is best
construed in a contextual and purposive manner as being a residual prohibition
on multiple rebate claims in respect of the same transaction without reference
to the category of the rebate claim.
Analysis - Filing of Second Rebate Claim:
[73]
By way of background,
for each monthly reporting period that occurred during the Supervisor Period
and the Subsequent Period, the Appellant applied for a rebate of 83% of the GST
pursuant to subsection 259(3) of the ETA. Each application for a PSB rebate
was assessed pursuant to subsection 297(1) and the rebate so assessed was paid
to the Appellant pursuant to subsection 297(3).
[74]
The Appellant applied
for a rebate of 17% of the GST paid for each of the Supervisor Period and the
Subsequent Period pursuant to subsection 261(1) on the basis that they had been
paid by mistake (the “Rebate Applications”). The Rebate Applications were
denied pursuant to subsection 262(2).
[75]
Subsection 262(2)
states:
(2) Only one application may be made under this Division
for a rebate with respect to any matter.
[76]
The Fanshawe College decision appears to be the only case to directly consider whether an
additional GST rebate may be filed pursuant to subsection 262(2) of the ETA.
[77]
Contrary to C. Miller
J.’s comments in Toronto District School Board, at paragraph 51, where
he stated that he would not have followed Fanshawe College, I would
follow the reasoning of Woods J. and disallow the 17% Rebate Applications. At
paragraph 58, Woods J. stated:
… The word "matter" in
section 262 in my view relates to a transaction -- in this case the purchase of
a book. If, for example, the College is entitled to a $10 rebate in relation to
the purchase of a book but it claims only $8 in error, section 262 precludes
the College from including the remaining $2 in another rebate application. The
manner in which the College could correct its claim for the GST in relation to
the book is to object to the assessment which determined the rebate. This must
be done within the time limits for filing objections.
[78]
The example by Woods J.
contained in the aforementioned quote where “matter” is interpreted as referring
to each book purchase, clearly captures the very situation in the present
appeals. On a plain reading of this provision, I agree with Fanshawe College
because it is technically correct, although as noted by Woods J., it produces
results that may be contrary to how the rebate has been understood to have
operated even by the Department of Finance in its Technical Notes.
[79]
Both the first and
second rebate applications fall under Division VI of the ETA. The
Appellant argued that Fanshawe College should be distinguished because the taxpayer in that
appeal was attempting to unfairly claim GST in excess of 100%. However, this
argument must be rejected given the “book” example offered by Woods J. at
paragraph 58. The approach taken by Woods J. accords with the approach to
statutory interpretation in Nowegijick v. The Queen et al., [1983] 1 S.C.R.
29, where the Supreme Court of Canada gave the widest possible scope to the
words “in respect of” and stated:
… The phrase "in respect
of" is probably the widest of any expression intended to convey some
connection between two related subject matters.
[80]
According to the
Appellant’s argument, from a textual interpretation, the meaning of the word “matter”
is ambiguous. The “any matter” restriction in subsection 262(2) means that once
a particular transaction has been the subject of a rebate claim of any kind, it
cannot be the subject of a second rebate application of any kind. Subsection
262(2) interpreted in a contextual and purposive manner requires that it be
read as a residual clause within Division VI of the ETA.
[81]
In accordance with Fanshawe College, subsections 259(3) and (6) preclude the filing of multiple PSB claims
in respect of any period or in respect of the same transaction. Section 261
refers to obtaining a rebate of tax paid in error as including tax, net tax,
penalty, interest or other obligation under that part of the ETA. The
conclusion from this is that there must be wording broad enough to capture
items beyond a “supply”. Subsection 262(2) should be viewed as a residual
prohibition on multiple rebate claims in respect of the same transaction.
[82]
The French version of
subsection 262(2) states:
(2) Demande unique. – L’objet d’un remboursement ne peut être
visé par plus d’une demande selon la présente section.
This literally translates to “the object of
reimbursement cannot be made on more than one application” and again lends
support to Woods J.’s interpretation.
[83]
As per the recent Supreme Court
decisions in Caisse populaire Desjardins de l’Est de Drummond v. R.,
[2009] 2 S.C.R. 94, and R. v. S.A.C., [2008] 2 S.C.R. 675,
when considering an ambiguity in a federal statute one must take both the
English and French versions of the statute into consideration. If one
version of the statute is ambiguous, as the English version is here, and the
other version of the statute is plain and unequivocal, as appears to be the
case with the French version, then the correct approach is to adopt the plain
and unambiguous version as the shared meaning. This approach also offers
support for Woods J.’s conclusion in Fanshawe
College.
[84]
Although the
Appellant’s argument respecting the use of the word “matter” and not the word
“supply” within subsection 262(2) has merit, I conclude, in reviewing the
textual, contextual and purposive interpretations to be accorded subsection
262(2), that the Appellant would have been precluded from making an additional
GST claim. This conclusion, while it has the potential to produce some
unfairness, is nevertheless the technically correct one.
[85]
In summary, since the
Appellant was not part of, or an agent of, the Crown during either the
Supervisor Period or the Subsequent Period, its claim for a GST refund paid by
mistake is dismissed with costs.
Signed at Ottawa, Canada, this 29th day of January 2010.
“Diane Campbell”
Schedule “A”
Partial Agreed Statement of Facts and Issues
Court File Nos.: 2005-4015(GST)G
2006-511(GST)G
TAX COURT OF CANADA
IN THE MATTER OF THE EXCISE TAX ACT
BETWEEN:
THE OTTAWA HOSPITAL CORPORATION
Appellant
- and –
HER MAJESTY THE QUEEN
Respondent
PARTIAL AGREED STATEMENT OF FACTS AND ISSUES
Couzin Taylor LLP John H.
Sims
Barristers & Solicitors Deputy
Attorney General of Canada
Ernst & Young Tower Department
of Justice
222 Bay Street, P.O. Box 143 Bank of Canada Bldg., East
Tower
Toronto, Ontario 234
Wellington Street
M5K 1H1 Ottawa, Ontario
K1A
0H8
Daniel Sandler Ernest
Wheeler
Michele Anderson Michael
Ezri
Counsel for the Appellant Counsel
for the Respondent
OVERVIEW
1.
These appeals concern whether The Ottawa
Hospital Corporation (the “Appellant”) is entitled to a GST refund in respect
of GST paid under Part IX of the Excise Tax Act, R.S.C. 1985, c.
E-15, as amended (the “ETA”) for the period beginning on July 16, 2001 and
ending on September 30, 2002 (the “Supervisor Period”) and the period beginning
on October 1, 2002 and ending on October 31, 2003 (the “Subsequent Period”).
STATEMENT OF FACTS
For the purposes of this proceeding only, the following facts are
agreed to by the Appellant and the Respondent:
2.
The Appellant is, and was, at all material
times, a public hospital governed by the Public Health Act, R.S.O. 1990,
c. P.40, as amended (the “PHA”), and a corporation governed by the Corporations
Act, R.S.O. 1990, c. C.38, as amended.
3.
On July 16, 2001, Dennis R. Timbrell was
appointed by Order in Council No. 1704/2001 as the hospital supervisor for the
Appellant pursuant to subsection 9(1) of the PHA.
4.
Under the terms of the Order in Council, the
hospital supervisor had “the exclusive right to exercise all of the powers of
the board, The Ottawa Hospital corporation and the members of the corporation”
as well as “the exclusive right to exercise all of the powers of the officers
of The Ottawa Hospital” other than the Chief Executive Officer/President of The
Ottawa Hospital.
5.
During the Supervisor Period, there were no
board meetings and there was no executive committee. Instead, the hospital
supervisor held periodic “Meetings with the Supervisor” for which a formal
agenda was prepared and minutes were kept. Such meetings were held on August
30, 2001, October 16, 2001, November 8, 2001, December 17, 2001, February 26,
2002, April 4, 2002, April 23, 2002, May 30, 2002, August 22, 2002, and
September 27, 2002.
6.
Pursuant to Order in Council No. 1675/2002, the
appointment of Dennis R. Timbrell as hospital supervisor was terminated at
midnight on September 30, 2002.
7.
During the Supervisor Period and the Subsequent
Period, the Appellant paid GST in respect of property and services that were
acquired.
8.
For each monthly reporting period of the
Appellant that occurred during the Supervisor Period and the Subsequent Period,
the Appellant applied for a rebate of 83 percent of the GST paid on goods and
services acquired during the Supervisor Period and the Subsequent Period under
subsection 259(3) of the ETA (the “PSB Rebate”).
9.
Each application for a PSB Rebate was assessed
by the Minister of National Revenue (the “Minister”) under subsection 297(1) of
the ETA and the rebate so assessed was paid to the Appellant under subsection
297(3), together with interest under subsection 297(4) where the rebate was
paid more than 21 days after the rebate application was filed.
10.
On December 1, 2003 and January 19, 2004,
respectively, the Appellant applied for a rebate of 17 percent of the GST paid
during each of the Supervisor Period and the Subsequent Period pursuant to
subsection 261(1) of the ETA (i.e., the GST paid during each such period that
was not included in the PSB Rebate applications referred to in paragraph 8
above) on the basis that such GST was paid by mistake (the “Rebate
Applications”). The Rebate Applications were for the amounts of $1,704,984.55
and $1,582,291.00, respectively.
11.
The Minister issued Notices of (Re)Assessment
dated February 13, 2004 (regarding the Supervisor Period) and August 8, 2005
(regarding the Subsequent Period) (collectively, the “Assessments”) denying the
Appellant’s Rebate Applications. The Minister confirmed the Assessments by
Notices of Decision dated August 24, 2005 and December 19, 2005, respectively.
12.
The Appellant filed Notices of Appeal from the
Assessments to this Honourable Court.
13.
The parties agree that they shall be entitled to
lead additional evidence and shall be entitled to ask the Tax Court of Canada
to draw inferences from the evidence presented, provided that such additional
evidence or inferences are not inconsistent with this partial agreed statement
of facts.
14.
Pursuant to subsection 261(3) of the ETA, the
parties agree that the Appellant’s claim for the period from July 16, 2001 to
November 30, 2001 is not payable by the Minister.
15.
In the event that these appeals are allowed, the
parties agree that the matters will be referred back to the Minister of
National Revenue for reassessment to determine the amount of the rebate payable
to the Appellant.
STATEMENT OF ISSUES
16.
The parties agree that the issues before this
Honourable Court are as follows:
i.
Whether the Appellant was part of, or an agent
of, the Crown during the Supervisor Period;
ii.
Whether the Appellant was part of, or an agent
of, the Crown during the Subsequent Period;
iii.
If the Appellant was a part of, or an agent of,
the Crown during the Supervisor Period and/or the Subsequent Period, whether it
had standing to file the Rebate Applications that are the subject of these
appeals and whether it has standing to appeal to the Tax Court of Canada in
respect of a claim for Crown immunity;
iv.
If the Appellant was a part of or an agent of
the Crown during the Supervisor Period and/or the Subsequent Period, whether
its immunity from federal tax under section 125 of the Constitution Act,
1867 was waived pursuant to a reciprocal taxation agreement entered into
between the Government of Canada, represented by the federal Minister of
Finance, and the Government of Ontario, represented by Ontario’s Minister of
Finance, effective July 1, 2000 (the “RTA”);
v.
Whether the Appellant is precluded by sections
262, 297, 299 and 306 and subsection 301(1.1) of the ETA from claiming the
rebates of GST paid by mistake.
AGREEMENT REGARDING EVIDENCE
17.
The Appellant and Respondent agree to file
copies of the following documents with the Court as exhibits for the purposes
of this proceeding:
[This list has not been reproduced as part
of the Agreed Statement of Facts and Issues as it is not essential to my
reasons.]
ALL OF WHICH IS RESPECTIVELY SUBMITTED.
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Per:___“Daniel Sandler”_Oct. 17, 2008
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Per:___“Michael Ezri”_Oct. 17, 2008
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Daniel Sandler
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Ernest Wheeler
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Michele Anderson
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Michael Ezri
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Couzin Taylor LLP
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Department of Justice
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Barristers & Solicitors
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Tax Law Services Section
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Ernst & Young Tower
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Bank of Canada Building
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222 Bay Street, P.O. Box 143
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East Tower, 9th Floor
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Toronto, Ontario
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234 Wellington Street
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M5K 1H1
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Ottawa, Ontario
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K1A 0H8
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Counsel for the Appellant
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Counsel for the Respondent
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Tel.: (416) 943-4434 / 943-5445
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Tel.: (613) 957-4805 / 957-4807
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Fax: (416) 943-2700
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Fax: (613) 941-2293
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