Citation: 2010 TCC 63
Date: 20100203
Docket: 2008-879(GST)G
BETWEEN:
FRASER INTERNATIONAL COLLEGE LIMITED,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Paris
J.
[1] The Appellant operates
Fraser International College (“FIC”), a
private “for profit” college offering courses of study designed to prepare international
students for admission to Simon Fraser University (“SFU”).
[2] The issue in this
appeal is whether the courses offered by FIC are exempt from GST. Sections 7
and 16 of Part III to Schedule V of the Excise Tax Act (“ETA”)
exempt a supply made by a school authority, public college or university
of a service of instructing individuals in certain courses. Those provisions
read as follows:
7. A
supply made by a school authority, public college or university of a service of
instructing individuals in, or administering examinations in respect of courses
for which credit may be obtained toward a diploma or degree.
16 A
supply made by a school authority, public college or university of a service of
instructing individuals in, or administering examinations in respect of,
courses (other courses in sports, games, hobbies, or other recreational pursuits
that are designed to be taken primarily for recreational purposes) that are
part of a program that consists of two or more courses and that is subject to
the review of, and is approved by, a council, board or a committee of the
school authority, college or university established to review and approve the
course offerings of the school authority, college or university.
[3] The dispute in this
case is whether the Appellant is a “university.” That term is defined in
subsection 123(1) of the ETA as follows:
123(1) In section 121,
this Part and Schedule V to X,
“university” means a
recognized degree-granting institution or an organization that operates a college
affiliated with, or a research body of, such an institution;
[4] The parties
disagree over the meaning to be given to the word “affiliated” in this
definition, and whether the FIC was a college affiliated with SFU, which is a
recognized degree-granting institution.
[5] The Appellant
contends that “affiliated” should be given its ordinary meaning, and that the
relationship between the Appellant and SFU falls within that meaning.
[6] The Respondent
takes the position that “affiliated” has a particular meaning when referring to
a college and requires a relationship between a college and a university
whereby the university agrees to grant degrees to the students of the college
upon completion of their course of study. Since SFU does not grant degrees to
students that graduate from FIC, the Respondent says FIC is not a college
affiliated with SFU.
[7] The Respondent also
says that even if the Court finds that the construction of “affiliated”
proposed by the Appellant is correct, the Appellant was still not, on the facts,
affiliated with SFU.
Background
[8] The Appellant was
incorporated in January 2006 by IBT Education Ltd., an Australian company that
operates a number of private colleges in Canada, Australia, Singapore and the United Kingdom. Those colleges are all
partnered with particular universities and offer university transfer programs
designed for international students. Successful completion of the programs
entitles students to enter the partner university, generally at the second year
level.
[9] The Appellant and
SFU entered into a “Recognition and Educational Services Agreement” (the
“Agreement”) on March 29, 2006. The Agreement contemplated a cooperative
arrangement between FIC and SFU pursuant to which FIC would develop and offer
university transfer programs and SFU would provide services and facilities to
assist FIC in the provision of those programs. In exchange, SFU would receive
fees from FIC.
[10]According to the
Agreement, SFU recognized FIC as being affiliated with SFU. Section 3 of the
Agreement set out that:
The University
acknowledges and agrees that, due to the nature and extent of the collaborative
arrangements between the Parties, the College is recognised as being
‘affiliated with’ the University from the Commencement Date but so that such
affiliation shall not incur any liabilities or obligations on the part of the
University save as expressly set out in this Agreement.
The collaborative arrangements between
SFU and FIC included the following:
— provision of instructional and office space
to FIC on SFU’s campus
—
SFU supervision of
FIC curricula and course materials;
—
approval of FIC instructors
by SFU;
—
guaranteed acceptance
into SFU of FIC students meeting academic standards set by FIC students;
—
use of SFU facilities
and services by FIC students.
—
creation of Academic Advisory
Committee composed of SFU and FIC members to set academic policy and oversee quality
of FIC courses; and
—
collaboration between
SFU and FIC to design curriculum for FIC based on SFU courses and materials in
a range of SFU undergraduate courses;
[11] Under section 7(f)
of the Agreement, SFU granted permission to FIC to promote itself as a college
affiliated with SFU and to promote its courses as been in affiliation with SFU.
Paragraph 5(k) required FIC to inform its students that they were students of a
college affiliated with SFU.
[12] The Agreement was
approved by both the SFU Senate and the Board of Governors in the Spring of
2006, and FIC began operating in September 2006.
[13] Ms. Beverly Hudson,
FIC’s director, testified that the university transfer courses offered by FIC
had the same curriculum as equivalent courses at SFU and were developed in
conjunction with and approved by SFU. FIC instructors met each semester with
course coordinators from SFU to review marking criteria, final examinations and
final grades, to ensure that the standards at FIC were equivalent to those at
SFU for the same courses. FIC students who achieved a 2.5 grade point average
in their courses were guaranteed entrance to SFU. She also said that the
admission letter sent to FIC students was signed jointly by her on behalf of
FIC and by the Director of Admissions for SFU.
[14] FIC’s recruiting
brochure, entitled “Your Pathway to Simon Fraser University”, showed SFU’s logo
with the notation “in association with Simon Fraser University” on its cover. A
welcoming message from the Vice-Chancellor of SFU appeared on the first page,
followed by a similar message on page two from Ms. Hudson. SFU’s involvement in
the design and monitoring of FIC’s courses was highlighted, and all of the
courses were presented as steps towards eventual entry into a corresponding SFU
faculty. The brochure also contained a page describing SFU and its campus, and
the list of accommodation options for students included SFU student residences.
[15] Ms. Hudson stated
that FIC student numbers were issued by SFU, and their student identification
card gave access to SFU libraries, sports facilities and computer labs, and FIC
students were entitled to join SFU clubs and societies.
[16] Ms. Kate Ross, the Registration
and Senior Director of Enrolment at SFU testified that SFU entered into the
agreement with FIC in order to increase its enrolment of foreign students,
which was consistent with its goal of diversifying its student population. It
also received financial benefits from the arrangement, both in terms of the
fees paid to it by FIC and the higher tuition paid by foreign students to
attend SFU. The evidence showed that 92% to 95% of FIC’s graduates went on to study
at SFU.
Respondent’s Arguments
[17] Counsel for the
Respondent submitted that an “affiliated college” is one whose graduates are
granted degrees by the university with which the college is affiliated. He said
that this concept “has been around for a long time”, was an “accepted
definition in university circles” and was “part of the institutional structure
of universities that has been imported into Canada from the United Kingdom”.
[18] The Respondent’s
counsel cited two cases (Re City of London and Ursuline Religion of the
Diocese of London)
and Reference Re An Act to Amend the Education Act (Ontario) which mention the term
“affiliated college”. He also referred to the “Directory of Canadian
Universities”
published by the Association of Universities and Colleges of Canada (“AUCC”)
which contained the following definition for “Federated, affiliated,
constituent institution” in its glossary:
Federated, affiliated,
constituent institution: a university or college may be associated with another university, often
called a parent university as a federated, affiliated, or constituent institution.
A federated institution is responsible for its own administration
usually and has the power to grant degrees, but during the term of federation
agreement it may suspend some or all of its degree-granting powers. An affiliated
institution is responsible for its own administration but does not have power
to grant degrees. In both cases the parent university oversees instruction in
the programs covered by the federated or affiliated agreement, and grants
degrees to the students who successfully complete those programs. A constituent
institution is an integral part of the parent university with respect
to both administrative and academic matters.
(emphasis added)
[19] Counsel referred to
the administrative position of the Canada Revenue Agency set out in Policy
P-220 entitled “Domestic Entities that Qualify as a “University” in the
Excise Tax Act”, dated October 26, 1998. According to paragraph 2 of that
document:
An organization is
considered to operate an affiliated college of a university or degree-granting
institution (the “parent”) only where there is a formal affiliation agreement
between the parent and the affiliate wherein the parent agrees to grant degrees
to graduates of the affiliated college in exchange for a certain degree of control
over the academic standards and course offerings of the affiliated college …
[20] Since SFU did not grant
degrees to graduates of FIC, the Respondent says FIC was not affiliated with
SFU.
[21] In the alternative,
the Respondent’s counsel contended that FIC and SFU were not affiliated within
the ordinary meaning of that word. He pointed to certain written materials
including FIC’s brochure to prospective students, which described FIC as
“associated” or “partnered” with SFU rather than “affiliated”. He also relied
on the fact that FIC was not listed in the AUCC Directory of Canadian
Universities as an affiliated college of SFU. He also drew the Court’s attention to subsection 35(2)
of the British
Columbia University
Act
which provides for the composition of the Senate for a university, and
requires that the governing body of each affiliated college must elect a
member. Since FIC had no seat on the SFU Senate, counsel said that this shows
that it was not affiliated with SFU.
Analysis
[22] The principles to be
applied in the interpretation of tax statutes are set out by the Supreme Court
of Canada in Placer Dome Canada Ltd. v. Ontario (Minister of Finance) at paragraphs 21 to 23:
21 In Stubart
Investments Ltd. v. The Queen, this Court rejected the strict approach to
the construction of taxation statutes and held that the modern approach applies
to taxation statutes no less than it does to other statutes. That is,
“the words of an Act are to be read in their entire context and in their grammatical
and ordinary sense harmoniously with the scheme of the Act, the object of the Act,
and the intention of Parliament” (p. 578): see 65302 British Columbia Ltd.
v. Canada. However, because of the degree of precision and detail characteristic of
many tax provisions, a greater emphasis has often been placed on textual
interpretation where taxation statutes are concerned: Canada Trustco
Mortgage Co. v. Canada. Taxpayers are entitled to rely on the clear
meaning of taxation provisions in structuring their affairs. Where the
words of a statute are precise and unequivocal, those words will play a
dominant role in the interpretive process.
22 On the other hand,
where the words of a statute give rise to more than one reasonable
interpretation, the ordinary meaning of words will play a lesser role, and
greater recourse to the context and purpose of the Act may be necessary: Canada
Trustco, at para. 10. Moreover, as McLachlin C.J. noted at para. 47,
“[e]ven where the meaning of particular provisions may not appear to be
ambiguous at first glance, statutory context and purpose may reveal or resolve
latent ambiguities.” The Chief Justice went on to explain that in order
to resolve explicit and latent ambiguities in taxation legislation, “the courts
must undertake a unified textual, contextual and purposive approach to
statutory interpretation”.
23 The interpretive
approach is thus informed by the level of precision and clarity with which a
taxing provision is drafted. Where such a provision admits of no
ambiguity in its meaning or in its application to the facts, it must simply be
applied. Reference to the purpose of the provision “cannot be used to
create an unexpressed exception to clear language”: see P. W. Hogg, J. E. Magee
and J. Li, Principles of Canadian Income Tax Law (5th ed. 2005), at p.
569; Shell Canada Ltd. v. Canada. Where, as in this case, the provision
admits of more than one reasonable interpretation, greater emphasis must be
placed on the context, scheme and purpose of the Act. Thus, legislative purpose
may not be used to supplant clear statutory language, but to arrive at the most
plausible interpretation of an ambiguous statutory provision.
[23] In this case, I have
not been persuaded by the Respondent that there is any ambiguity in the meaning
of “affiliated” as used in the definition of “university” in the ETA.
[24] The cases cited by
the Respondent do not shed any light on the meaning of the term “affiliated”
and do not support the proposition that it has a special meaning in “university
circles.” The only place other than the CRA’s own policy statement in which
one finds the definition of “affiliated” proposed by the Respondent is in the glossary
in the AUCC “Directory of Canadian Universities”. However, in the absence of any evidence that
Parliament considered the views of the AUCC when drafting the definition of
“university” in the ETA, I am unable to accord the glossary definition
any authority for the purpose of interpreting the term “affiliated.”
[25] Nor am I satisfied
on the basis of the AUCC glossary entry alone that “affiliated college” is a
specialized term in the field of post-secondary education that has an
established and accepted legal meaning. Where a term used in a taxing statute has
a well-defined legal meaning, it is reasonable to assume that Parliament was
cognizant of the general law and intended to adopt that meaning (Will-Kare
Paving & Contracting Limited v The Queen).
[26] In this case,
though, the Respondent has not shown that there is an accepted legal meaning of
“affiliated college” either in federal or provincial law. The only statutory
references to “affiliated college” that the Respondent provided were in the University
Act, which does not define the term. Subsection 37(1) of that Act
vests the governance of a university in the university’s Senate and, in
paragraph 37(1)(v), gives the Senate the power to establish the terms of
affiliation with other educational institutions including colleges. It reads:
37(1) The
academic governance of the university is vested in the senate and it has the
following powers:
…
(u) to set the terms or affiliation with
other universities, colleges or other institutions of learning and to modify or
terminate the affiliation;
This suggests to me that the B.C.
Legislature did not intend to limit the terms of an affiliation between a
university with a college to those set out in the AUCC glossary definition
referred to above, but rather has left them to each university Senate to
decide.
[27] Canada Revenue
Agency’s administrative position set out in Policy P-220 cannot assist the
Respondent in this case because it has not been shown that there is any
ambiguity in the use of “affiliated” in the definition of “university”.
Administrative practice is only a useful guide in cases where there is more
than one reasonable interpretation available. Where no ambiguity is present,
administrative practice should be accorded little weight.
[28] Little can be
gleaned from the statutory context here. The word “university” is used in a number
of places in the ETA and the related Regulations, including Part
III of Schedule V. Some examples
are:
—
paragraph
19(3)(c) and subsection 21(3) of the Streamlined Accounting
(GST/(HST) Regulations concerning the eligibility of a university to use the
Streamlined Method of Accounting for GST;
—
paragraph 259(1)(c)
of the ETA which provides a rebate of GST on the purchase of printed
materials by a university;
—
subsection
191(6) of the ETA which provides an exception to the self-supply rule
for a student residence where the builder is a university; and
—
paragraph 149(1)(b)
or (c) which excludes universities from the application of determining
whether an organization is a financial institution.
[29] A “university” is
also included in the definition of “public service body” in subsection 123(1)
of the ETA, which is relevant in the determination of the small supplier
threshold and the tax treatment of capital real property as well as the
entitlement to use the Streamlined Method of Accounting. A“selected public
service body” is entitled to a rebate of 67% of the GST it pays on supplies
used to make exempt supplies, but the availability of this rebate to
universities is restricted to those not operating for profit.
[30] While this list is
not necessarily exhaustive, the sections of the ETA and Regulations
in which the word “university” are found illustrate the “degree of precision
and detail characteristic of many tax provisions” which leads in such cases to
greater emphasis being placed on textual interpretation.
[31] As far as I am able
to tell, nothing in these provisions gives any insight into Parliament’s
intention in choosing to include affiliated colleges in the definition of
“university”, nor does any latent ambiguity in that definition arise from this
statutory context.
[32] I agree with counsel
for the Appellant that if Parliament had intended that an entity would only be
affiliated with a university if the university granted a degree for the course
of study at the affiliated entity, this restriction would have been drafted
directly into the legislation.
[33] Since it has not
been shown that there is any explicit or latent ambiguity in the use of the
word “affiliated” in the definition of “university” in the ETA, it is
appropriate to give it its ordinary meaning. The verb “affiliate” is defined in
the Canadian Oxford Dictionary
as follows:
1. attach or connect (to a
larger organization); adopt as a member branch, etc.
2. associate oneself with
a society or organization.
The Random House Dictionary of
the English Language
gives its meaning as:
1.
to bring into close
association or connection: The research center is affiliated with the
university. 2. to attach or unite on terms of fellowship; associate
From these definitions, it appears
that “affiliated” in its ordinary sense means “associated” or “closely
connected with”.
[34] The evidence
provided by the Appellant makes it abundantly clear that FIC was associated or
closely connected with SFU. I would refer in this respect to collaborative
arrangements between FIC and SFU set out in the Recognition and Educational
Services Agreement. The uncontradicted testimony of Ms. Hudson was that those
arrangements were in fact implemented by FIC and SFU and that FIC presented and
conducted itself as being associated with SFU and as providing a direct pathway
to entrance to SFU for international students. Furthermore, the language used
by FIC in its written materials was descriptive of a close relationship or
connection between FIC and SFU, and it is immaterial that it referred to itself
as being associated or partnered with SFU rather than affiliated.
[35] I also do not accept
the Respondent’s argument that, since FIC had no seat on the SFU Senate, it was
not affiliated with SFU. I cannot see that the failure to comply with paragraph
35(2)(j) of the Universities Act changes in any way the nature of the
relationship between SFU and FIC. It may be that FIC is entitled to elect a
member to the SFU Senate, and that it could insist on it being permitted to do
so. There was no evidence that SFU would refuse to allow it to do so.
[36] For these reasons, I
find that the Appellant falls within the definition of “university” in the ETA
and that as a result, the courses it offered were exempt supplies under either
section 7 or 16 of Part III of Schedule V to the ETA.
[37] The appeal is allowed,
with costs to the Appellant, and the assessment is vacated.
Signed at Ottawa, Canada, this 3rd
day of February, 2010.
“Brent Paris”
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