Citation: 2009 TCC 17
Date: 20090316
Docket: 2008-1135(GST)I
BETWEEN:
YVES LEMIEUX,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
[OFFICIAL ENGLISH
TRANSLATION]
REASONS FOR JUDGMENT
Tardif J.
[1]
This is an appeal from
the decision of the Quebec Minister of Revenue to refuse a tax rebate in the
amount of $3,015.17 by the Appellant for “substantial renovations” to a single
unit residential complex pursuant to sections 123 and 256 of the Excise Tax
Act, R.S.C. (1985) c. E-15, (the ETA).
[2]
The evidence consists
only of the testimony of Yves Lemieux. He explained that he managed a group home for nine girls between the ages of 14 and 17. The
adolescents were sent there under the recommendation of the D.P.J. (Directeur
de la protection de la jeunesse - Youth Protection Director). They are people
requiring support and intervention from a resource person in a timely manner.
[3]
At one point, Mr.
Lemieux decided to make an addition to the girls’ existing 2,400 square foot residence
by incorporating a 1,120 square foot loft that would be his exclusive
residence. The purpose of this was to ensure greater privacy as it was
completely separate from where the girls lived.
[4]
The residence in
question, which is on top of a two-car garage, was reserved exclusively for the
Appellant and his family. A door with a mechanical lock separated them; they
benefitted from an independent exterior door, well identified on the pictures
submitted as Exhibit A-2.
[5]
The Appellant explained
that the addition was totally independent from the old residence, since he
benefitted from his own electrical system, his own heating system and his own
water heater. Both units shared the septic tank.
[6]
The loft had its own
account with Hydro‑Québec and was issued a separate bill.
[7]
The addition at issue
required expenditures of $140,000. However, the land where the building was
built was not subject to a cadastral subdivision. Contiguous and attached to
the existing building, which had 2,400 square feet of habitable space, the
addition was constructed and installed on the same land.
[8]
The insurance coverage
was for the whole building, which had one municipal address; Hydro‑Québec
billed a separate unit identified by the number 500A for electricity, while the
other bore the number 500. The municipality refuses to attribute an independent
civic number.
[9]
It is these original
facts that are at the heart of issue, which, moreover, were not subject to dispute
or objection.
[10]
The Appellant maintains
that his building is divided into two residential complexes under one deed. He
confirms having made an error when he filled out an application for a GST/HST
rebate pursuant to section 256 of the ETA.
[11]
He alleges that it was
not a major addition, but a newly constructed residential complex that possess
all the attributes that make it independent. From this description and
interpretation, the Appellant maintains that he met the criteria to qualify for
the GST credit because the loft is a completely separate apartment from the
pre-existing structure, thus a building in itself.
[12]
The Appellant relied on
Information Bulletin B-092
and argues that the example provided at page 16 of the Bulletin corresponds to
his situation. The building that is described there is physically distinctive
from the existing residence. It would seem arbitrary to distinguish the
Appellant’s situation from the William L. example but it is clear that the Information
Bulletin has no legal force and that the established case law does not provide
for a rebate in a situation like the Appellant’s.
[13]
The Appellant also
maintained that his project was very specific and that he qualified for special
treatment, even exceptional. In his written notes, the Appellant indicated that
the evidence showed that it was a new building and not substantial renovations,
like he himself described them when requesting a rebate.
Analysis
[14]
The photos submitted
clearly illustrate that the work carried out incorporated the existing
building, continuing a project that was very important and bore the significant
cost of $140,000.
[15]
To start, it is
important to separate the overall project from the rest of the garage, which in
itself is proves to be very difficult because the evidence did not separate the
expenses for the garage from those for the loft erected on top.
[16]
It is
important to remember the definitions of the various concepts.
123(1). "substantial
renovation" of a residential complex means the
renovation or alteration of a building to such an extent that all or
substantially all of the building that existed immediately before the
renovation or alteration was begun, other than the foundation, external walls,
interior supporting walls, floors, roof and staircases, has been removed or
replaced where, after completion of the renovation or alteration, the building
is, or forms part of, a residential complex;
256(1). "single unit residential complex" includes
(a) a multiple unit residential complex that
does not contain more than two residential units, and
(b) any other multiple unit residential
complex if it is described by paragraph (c) of the definition “residential
complex” in subsection 123(1) and contains one or more residential units that
are for supply as rooms in a hotel, motel, inn, boarding house, lodging house
or similar premises and that would be excluded from being part of the
residential complex if the complex were a residential complex not described by
that paragraph.
123(1).
"residential complex" means
(a) that part of a building in which one or more residential
units are located, together with
(i)
that part of any common areas and other
appurtenances to the building and the land immediately contiguous to the
building that is reasonably necessary for the use and enjoyment of the building
as a place of residence for individuals, and
(ii)
that proportion of the land subjacent to the
building that that part of the building is of the whole building,
(b) that part of a building that is
(i)
the whole or part of a semi-detached house,
rowhouse unit, residential condominium unit or other similar premises that is,
or is intended to be, a separate parcel or other division of real property
owned, or intended to be owned, apart from any other unit in the building, and
(ii)
a residential unit,
together with
that proportion of any common areas and other appurtenances to the building and
the land subjacent or immediately contiguous to the building that is
attributable to the unit and that is reasonably necessary for its use and enjoyment
as a place of residence for individuals,
. . .
[17]
Other decisions are
relevant. The Honourable Justice Lucie Lamarre, in France Camiré, docket
2007-1560(GST)I, confirmed in paragraph 9:
… Bulletin B‑092
states, under "Eric L.": "To be considered a newly constructed
residential complex, the addition must at least double the size of the
habitable area of the existing residence." The Bulletin states that an
added garage does not count because it is not considered a
"habitable" area. Similarly, I would say that a patio is not a
habitable area. In my opinion, the Bulletin is not mistaken on this point,
considering the definition of "residential complex", which
refers specifically to the residential use of the building.
[18]
In Alex and Lynn
McLean, docket 97-2286(GST)I, it is indicated in paragraphs 6 and
9 :
6. The definition of substantial renovation
is restrictive. Firstly, it has no reference to the total costs of the
renovation in relation to the value of the home. …additions are not to be
considered. The only items that are considered are the renovations or
alterations of "the building that existed immediately before the
renovation or alteration was begun". …
9. The definition of substantial renovation
is quite severe as is evident from the above analysis. But that is what the Act
says and I am bound by the Act. It may be that substantial new additions to an
existing structure might qualify as new housing but that would not appear to
apply to the relatively minor additions contemplated in this appeal.
[19]
In Robert B. Sneyd
v. Her Majesty the Queen, docket A-306-99, in paragraphs 9 to 12, the
Honourable Justice Létourneau of the Federal Court of Appeal wrote:
9. First, the term "complex"
denotes an aggregate of units. Where a building has more than one residential
unit within it, the "residential complex" is the aggregate of the
various residential units. In my view, it runs counter to the very meaning of
the word "complex" to qualify as a complex each and every residential
unit of a "residential complex". The meaning given by the judge to
the words "residential complex", whereby any area containing a single
apartment constitutes a residential complex, inescapably leads to a
proliferation of residential complexes within a single building which has many
residential units.
10. Second, the judge’s interpretation of
"residential complex" is not supported by the statutory definition of
these words. Indeed, "residential complex" is defined in subsection
123(1) of the Act as "that part of a building in which one or more
residential units are located" (my emphasis). The definition does not
refer to "a" part of the building, but rather "that" part
of the building which contains one or more residential units. This means that
if a building has one residential unit, then the relevant residential complex
is that part of the building where that one unit is located. Where the building
has two residential units, then the "residential complex" is that
part of the building where the two units are located.
11.
In my view, the French definition of
"residential complex" (immeuble d’habitation) strengthens that
interpretation. "Immeuble d’habitation" is defined in paragraph
123(1)(a) of the Act as "la partie constitutive d'un bâtiment qui
comporte au moins une habitation". Again, the French text uses the
definite article. Furthermore, the use of the word "constitutive" is
indicative of Parliament’s intent. The word "constitutive" has been
defined as "Qui constitue l'essentiel de" and "Qui constitue la base,
le fondement d"une chose": See Le Petit Robert, Dictionnaire de la
langue française; Trésor de la langue française: Dictionnaire de la langue du
XIXe et du XXe siècles (1789-1960), Paris, Éditions du Centre national de la
recherche scientifique, 1978. The use of this word with the definite article
indicates that "residential complex" is intended to refer to that
core part of a building given over or assigned to residential purposes. Had
Parliament intended to break up a building into many constitutive parts or a
number of such parts, it would have used the words "une partie" or
"une partie constitutive", but not "la partie
constitutive".
12. Third, the judge’s
interpretation of "residential complex" defeats the overall purpose
of the Act as well as that of the GST New Housing Rebate. The Act is a taxing
statute whose purpose is to raise government revenues. The GST New Housing
Rebate is a limited exception to that purpose. Housed in subsection 256(2) of
the Act, its object is to provide a construction and renovation incentive to
owners of small dwellings, i.e., dwellings which contain a single residential
unit (subsection 123(1)) or no more than two residential units (subsection
256(1)). That the provision is aimed at owners of relatively small buildings is
further indicated by the ceiling of $450,000 on the total fair market value of
the "residential complex" and by the requirement that the owner or a
relative be the first inhabitant of the newly constructed or renovated unit
(subsection 256(2)). To interpret "residential complex" within the
phrase "single unit residential complex", as the judge did, to
include any single apartment in a much larger aggregate of residential units
would go against this carefully tailored scheme. Otherwise, construction or
substantial renovation to any apartment worth less than $450,000 would qualify
for the rebate, even if the building as an aggregate was worth millions of
dollars and contained dozens of apartments or residential units. This offends
the expanded definition of "single unit residential complex" in
subsection 256(1) which, while recognizing the benefit of the tax rebate to a
multiple unit residential complex, limits it, however, to a complex that does
not contain more than two residential units.
[20]
In light of the
dispositions provided by the ETA and the various decisions on the subject, two
strong elements come to light: first, it is a different situation, and second, Parliament
not only outlined extremely specific parameters with respect to eligible
buildings but also the eligible cost of a project, which can be a maximum of
$450,000.
[21]
The definitions of
“additions” and “substantial renovations” must be appreciated in the context in
that it is not possible to obtain a rebate indirectly when the ETA does not
authorize it directly. To circumvent the $450,000 ceiling, a person could
proceed in steps or in stages, both of which will exceed the ceiling
established by the ETA.
[22]
It also provides that
the rebate applies to a new structure; renovations or an addition could
represent a way of indirectly procuring what the ETA does not authorize.
[23]
Therefore, the entire
area of the garage must be removed from the analysis; with respect to the
habitable area above that, the project does not meet the requirements of the
ETA.
[24]
For these reasons, the
appeal must be dismissed.
Signed at Ottawa,
Canada, this 16th day of March 2009.
“Alain Tardif”
Translation
certified true
on
this 5th day of May 2009.
Bella Lewkowicz, Translator
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