Citation: 2009 TCC 39
Date: 20090120
Docket: 2006-1432(GST)G
BETWEEN:
TORONTO
DISTRICT SCHOOL BOARD,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Miller J.
[1]
This is an intriguing
story of money, politics, schools, jurisdiction and the Constitution, but
ultimately there is a question of law to be determined.
[2]
Pursuant to an Ontario Order-in-Council
dated August 27, 2002, control and charge over the administration of the
affairs of the Toronto District School Board (“TDSB”) was vested in the
Ministry of Education of the Province of Ontario.
The Ministry of Education appointed a supervisor, Mr. Christie, who
remained in place until the end of October 2003. In October 2003, a three-person
co‑management team was appointed by the Minister of Education under the
newly‑elected Liberal Government, upon the resignation of Mr. Christie.
The vesting order was revoked in February 2004. The TDSB sought a rebate
of 32% of the Goods and Services Tax paid by it, during the vesting order
period (beyond the 68% rebate to which it had previously been entitled)
effectively seeking a 100% rebate. The rebate claimed by TDSB was based on
their position that during the vesting order period the TDSB was, in effect,
the Province of Ontario or an agent of the Province of Ontario, and therefore,
pursuant to section 125 of the Constitution Act, 1867 and section 122
of the Excise Tax Act
immune from payment of GST.
[3]
The Canada Revenue Agency
denied the rebate application on the basis that TDSB was not the Province of Ontario, nor an agent of the Province of Ontario. At trial, the Respondent argued even if the TDSB was
a Crown agent, such agency did not extend to acquiring property and services on
behalf of the Minister. The Respondent also argued that if the TDSB was an
agent of the Province of Ontario, it was subject to the
reciprocal taxation agreement between Ontario and Canada pursuant to which no immunity was extended to the
TDSB. Further, as a Crown agent, it had no standing in any event to file
the rebate claim nor to bring this action. Finally, if the TDSB does have
standing, it is precluded from making the rebate claim by the application of
section 262 of the Excise Tax Act, which prohibits filing a second-rebate
claim.
The Facts
[4]
The TDSB is a
corporation governed by the provisions of the Education Act. It is governed
by a Board of 22 elected Trustees who make decisions with respect to finance,
staff and the business of the school board generally. The TDSB does not seek
Ministerial approval for decisions, but operates autonomously from the
Minister, subject to the Government’s funding allocation and the requirements
of the Education Act to present a balanced budget. The Appellant’s funding
is derived from residential property tax revenue, business property tax
revenue, provincial grants and other sources such as tuition fees from
non-residents and the rental, lease or sale of surplus properties. The TDSB’s
Chief Executive is the Director of Education. There are Executive
Superintendents for business services, human resources, facilities, programs
and school services, legal and equity. There are also 24 Superintendents
responsible for 24 districts in the Toronto region. The
TDSB is a registered charity and a GST registrant. It files monthly GST returns
and is entitled to a 68% rebate in accordance with section 259 of the Excise
Tax Act.
[5]
The TDSB undergoes an
annual budget process which starts in the fall of each year leading to the filing
of a balanced budget with the Government of Ontario by the end of the following
June. In June 2002, the Board did not file any budget, as the Trustees
could not reach agreement on a balanced budget. In January/February of 2002,
it was evident to the Trustees that they faced a $90 million
shortfall. The Trustees refused to cut $90 million to present a balanced
budget. In August, the Minister appointed an investigator, who reported by
August 20, 2002 recommending that control and charge over the administration
of the affairs of the TDSB be vested in the Ministry, in accordance with
Division D of Part IX of the Education Act. The Minister accepted that
recommendation and on August 27, 2002, an Order-in-Council issued stating:
NOW THEREFORE, under Education Act, R.S.O. 1990, c.E.2, s.
257.31(2), control and charge over the administration of the affairs of the
Toronto District School Board be vested in the Ministry of Education;
[6]
On August 30, 2002, the
Minister appointed Mr. Paul Christie under subsection 257.48(2) of the Education
Act as Supervisor. It was clear from Mr. Christie that he was known to
the Conservative Government, and he admitted allegiance to the Government of
the day. It is important to note the Terms of Reference of Mr. Christie’s
appointment.
TERMS OF REFERENCE
SUPERVISOR, TORONTO DSB
The powers and duties of the supervisor shall be in accordance with
the sections set out in Part IX, Division D of the Education Act.
In carrying out his/her duties, the supervisor shall prepare and implement
a plan to return the Toronto District School Board to a balanced financial
position, taking into account the recommendations and findings outlined in the
investigator’s report.
The supervisor is delegated the control and charge over the exercise
and performance by the board of its powers, duties, and obligations with
respect to all matters including, but not limited to, matters respecting those
items outlined in section 257.33 of the Education Act.
For this purpose, the supervisor shall:
1. develop a communication strategy to inform
parents, board trustees/staff and members of the public what is happening and
to reassure them of the continuance of the Toronto District School Board and
its commitment to provide a quality education for students.
2.
ensure cash flow availability to meet the
financial obligations of the board.
3.
seek the advice of board trustees, staff and
other parties in any matter that he/she deems appropriate, including the
establishment of board committees.
4.
develop a strategic plan that will return the
board to a balanced financial position, taking into account the recommendations
and findings outlined in the investigator’s report. The plan is to identify
specific action that will be implemented to achieve this purpose.
5.
direct and oversee the implementation of the
plan.
6. provide progress updates to the Assistant
Deputy Minister, Elementary/Secondary Business and Finance.
[7]
As Mr. Christie
acknowledged, he believed his scope was broad – “L’état est moi”. I conclude
that he had broader powers than the Trustees themselves.
[8]
On September 17, 2002,
Mr. Christie, with the assistance of Mr. McVicar, also appointed by the
Government to assist Mr. Christie, published guidelines of the roles and rules
and responsibilities of Trustees, which included:
…
2. All committees and meetings of the Board,
including special meetings, are suspended for the month of September.
3. Board and committee meetings will resume
in October as scheduled to receive information, approve minutes and provide advice
to the Supervisor through the Director.
…
6.
Committee work to develop policy recommendations
will be restricted to staff. All policy will be reviewed and approved by the
Supervisor. A complete review of all policies has been initiated.
7.
All personnel issues and staff changes will be
approved by the Supervisor or otherwise managed according to a process to be
approved by the Supervisor.
8.
All Trustee initiatives requiring the
expenditure of Board resources or the involvement of staff will be subject to
the approval of the Supervisor through the Director.
9. Trustee written communication to the
broader community and external stakeholders, as provided through Board
resources and at Board expense, including courier services, is suspended until
further notice.
…
11. No expenses over stipend and no expenses
that exceed the Education Act will be paid. All expenses for conferences
will be approved by the Supervisor. …
[9]
This gives the flavour
of their restrictive nature. Mr. Christie acknowledged they were not
well-received by the Trustees. Though they could not meet formally, the
Trustees could, and did, hold informal public meetings, though with no authority
to conduct any business.
[10]
In November 2002, Mr.
Christie issued a subsequent memo relaxing the restrictions somewhat and
suggesting that the Trustees could meet to consider matters that he put to
them. He also allowed them to requisition a meeting, though again made it clear
they had no power to exercise at such meetings. While they did offer advice, it
was clear that Mr. Christie had no obligation to accept such advice and often
did not. He kept the Director of Education as a buffer between himself and the
Trustees. He looked very much more to the TDSB staff to assist in his
decision-making than the Trustees. Indeed, Mr. Higgins, the Executive
Superintendent of Finance, indicated that Mr. Christie always followed his
financial advice.
[11]
In working primarily
with staff, Mr. Christie was able to release a balanced budget to the media on
November 19, 2002 for the 2002-2003 budget. He acknowledged that the
Trustees had very little role in reaching this objective, while staff had a
significant role. Mr. Christie also met regularly with the Assistant Deputy
Minister, Mr. Hartmann, and the finance staff at the Ministry of
Education. He occasionally met with people in the Premier’s office and also
with Members of Caucus to get a better understanding of the political picture.
It was decided with the Ministry that some deficit could be expensed over
time.
[12]
In July 2003, Mr.
Christie released the 2003-2004 budget, having gone through a similar process
as the previous year. This budget showed a $54 million deficit. Mr. Christie
explained that as long as he satisfied the Ministry that the TDSB had a plan to
manage itself out of deficit financing, in a three-year recovery plan, the
one-year budgetary deficit would be acceptable. As Mr. Christie put it, when he
advised the Assistant Deputy Ministry, the Premier’s office and the Caucus Members
of the drastic consequences of further reductions, there was no political
appetite to force a balanced budget.
[13]
During his term as
supervisor, Mr. Christie documented 401 decisions over 35 decision-making
meetings. Mr. Tomczak, the Senior Manager of Board Services, did the documenting
of these decisions, as he met daily with Mr. Christie for many months. These
decision-making meetings were mainly with the Director of Education and
the senior management team. Mr. Christie also had many informal meetings with
staff. The Trustees did not attend these meetings, though Mr. Christie did
occasionally seek their advice, as this was mandated in his Terms of
Reference.
[14]
Both Mr. Tomczak and
Mr. Christie went through several of the 401 decisions that Mr. Christie
made, to give me some flavour of the nature of those decisions. It was clear
that Mr. Christie could, and did, make decisions on every aspect of Board
business. Mr. Tomczak went so far as to suggest Mr. Christie could make
decisions on information items, not even calling for decision. He stated
the Trustees would never do such a thing – there was a clear demarcation
between the responsibilities of the Trustees versus those of the staff. Not so
with Mr. Christie; he could be involved in everything.
[15]
Mr. Christie spoke to
Government officials throughout his tenure, though this came to an abrupt halt
when the Liberal Government came into power in the fall of 2003. It was clear
to Mr. Christie that they had a different agenda to get back to a community
based, democratic governance structure. The Assistant Deputy Ministry suggested
that Mr. Christie might want to have his resignation at the ready. He did and
his resignation was accepted on October 31, 2003. Mr. Christie summed up
his time as supervisor in two ways: first, that he changed the financial course
of the TDSB; and second, that he always acted on the assumption he was
acting for the TDSB with the sanction of the Minister, accountable to students
and parents.
[16]
For the period from
October 31, 2003, until the revocation of the vesting order in February 2004,
the new Government put control and charge over the administration of the
affairs of the TDSB in the hands of a co-management team, consisting of Mr.
Hartmann, the Assistant Deputy Minister, Ms. Shelley Laskin, the Chair of the
Board of Trustees, and Mr. David Reid, the Director of Education. They were
charged with day-to-day operations of the TDSB with authority to exercise all
powers and perform duties conferred on the Minister under Division D of Part IX
of the Education Act. In effect, they replaced Mr. Christie with the
same mandate, though rather than a one-man show there was now a
triumvirate representing Government, Trustees and the staff. According to Mr.
Tomczak, it was a way to ease back to the Trustees while ensuring the
budget did not unravel. Trustee Committee structures were put back in place
during those few months, though decisions still were subject to the
co-management Team approval. There was less interaction between the staff
and the co-management team as there was previously between staff and Mr.
Christie. The co-management team would receive advice from the Trustees, though
again, would not always follow it.
[17]
Mr. Tomczak attended
all co-management team decision-making meetings. He was clear that if there
were any disagreements it would be Mr. Hartmann, the Assistant Deputy
Minister, who would have the final word.
[18]
Throughout the
supervisory period and co-management period, the TDSB never lost its status as
a separate legal corporate entity; property was bought and sold in its own
name, it prepared its own financial statements and employees remained employees
of the TDSB. As Mr. Higgins summarized, the main difference was the process of
decision-making which was much simplified.
[19]
By Order-in-Council of
February 2004, the vesting order was revoked. In March 2004, the TDSB
filed its application for a rebate of approximately $6,590,000 and $1,771,000
as rebates of tax paid in error in accordance with section 261 and 262 of the Excise
Tax Act during the supervisory period and the co‑management team,
respectively. The Minister denied these claims.
Legislative Framework
[20]
Section 125 of the Constitution
Act, 1867 applies to prohibit imposition of GST on Provincial Governments
or their agents:
125 No Lands or Property belonging to Canada or any Province shall be liable to
Taxation.
[21]
Section 122 of the Excise
Tax Act obliges the province, as a supplier, to collect and remit tax,
though makes no mention of an obligation on the province to pay tax:
122 This
Part is binding
(a) …
(b)
on Her Majesty in right of a province in respect of obligations as a
supplier to collect and to remit tax in respect of taxable supplies made by Her
Majesty in right of the province. …
[22]
Subsection 259(3) of
the Excise Tax Act permits TDSB to apply for a 68% rebate:
259(3) If a person (other than a
listed financial institution, a registrant prescribed for the purposes of
subsection 188(5) and a person designated to be a municipality for the purposes
of this section) is, on the last day of a claim period of the person or of the
person’s fiscal year that includes that claim period, a selected public service
body, charity or qualifying non-profit organization, the Minister shall,
subject to subsections (4.1) to (4.21) and (5), pay a rebate to the person
equal to the total of
(a) the amount equal to
the specified percentage of the non-creditable tax charged in respect of property
or a service (other than a prescribed property or service) for the claim
period, and
(b) the amount equal to
the specified provincial percentage of the non-creditable tax charged in
respect of property or a service (other than a prescribed property or service)
for the claim period.
[23]
Subsection 261(1) of
the Excise Tax Act permits a person to apply for a rebate paid in error:
261(1) Where a person has paid an amount
(a) as
or on account of, or
(b) that
was taken into account as,
tax, net tax, penalty, interest or other
obligation under this Part in circumstances where the amount was not payable or
remittable by the person, whether the amount was paid by mistake or otherwise,
the Minister shall, subject to subsections (2) and (3), pay a rebate of that
amount to the person.
[24]
Subsection 262(2) of
the Excise Tax Act permits only one rebate application under Division VI
with respect to any matter:
262(2) Only
one application may be made under this Division for a rebate with respect to
any matter.
[25]
Division D of Part IX
of the Education Act sets out the procedure for the vesting of control
and charge of the administration of the affairs of a Board for the Minister. I
have attached relevant portions as Appendix “A”.
[26]
Though not part of the
legislative framework, it is useful to set out at this stage parts of the Reciprocal
Taxation Agreement of June 30, 2000,
an agreement between Ontario and Canada:
1. The definitions in this clause apply in this agreement.
(a) “Federal Act” means the Excise Tax Act,
R.S.C. 1985, c. E-15.
(b) “federal tax” means any tax imposed or
levied under the Federal Act, other than the value-added tax.
…
(f) “value-added tax” means any tax imposed
or levied under Part IX of the Federal Act.
…
4. It is understood that neither Canada nor the Province is deemed, by
reason of having entered into this agreement, to have surrendered or abandoned
any of its powers, rights, privileges or authorities under the Constitution of
Canada, or to have impaired any such powers, rights, privileges or authorities.
…
6.
The Province agrees:
(a)
…
(b)
that provincial Crown corporations or agencies,
other than the entities listed in Schedule A, shall pay the value-added tax in
accordance with the Federal Act, as if that Act were applicable to them;
…
SCHEDULE A
…
Ministry
of Education
Advisory
Council on Special Education
Languages
of Instruction Commission of Ontario
Ontario Parent Council
Ontario Student Assistance Appeal Board
Provincial
Schools Authority
Selection
Board (Ontario Graduate
Scholarships)
[27]
A representative of the
Ministry of Finance for Ontario, Mr. Goethel, was involved with the negotiations
of this Agreement. He testified that the purpose was for vendor simplicity in
dealing with Government entities. He confirmed that only those Crown agencies
listed in Schedule A remained immune from taxation. He also advised that
no consideration was given to the question of school boards. The criteria used
to determine what entities were accepted as Crown agents for purpose of
Schedule A were:
(i) They had to be a Crown agent.
(ii) They could not be commercially
competitive with the private sector.
(iii) There must be national
consistency.
[28]
During the period the
Reciprocal Taxation Agreement was in effect a couple of entities were added to
the Schedule A list though the TDSB was not one of them.
Issues
[29]
The overarching issue
is whether, for the period August 2002 to February 2004, the TDSB was
entitled to rebates of GST based on immunity from taxation pursuant to section
125 of the Constitution Act, 1867 and section 122 of the Excise Tax Act.
To answer this question, the Appellant argued that I must determine the
following:
(i) During the relevant
period, was the TDSB part of or an agent of the Crown, entitling it to Crown
immunity?
(ii) If so, did the TDSB
have standing to make the rebate claim and bring this appeal?
(iii) If so, was its
immunity affected by the Reciprocal Taxation Agreement?
(iv) Does section 262 of
the Excise Tax Act preclude the TDSB from claiming rebates paid by
mistake, having already claimed rebates?
Analysis
(i) During the relevant
period, was the TDSB part of or agent of the Crown entitling it to Crown
immunity?
[30]
With respect to counsel
and their able arguments, I suggest that the emphasis on Crown agency is
misplaced. Section 125 of the Constitution Act, 1867 specifically
exempts from taxation “Lands or Property belonging to … any Province”. The
question to ask, therefore, is not whether there is a Crown agency (indeed the
Respondent acknowledged the Government had de jure control of TDSB), but
whether in the circumstances the GST was a tax on lands or property belonging
to Ontario. In effect, by controlling the
administration and affairs of the TDSB, did the Province of Ontario become the
owner of TDSB property? I have concluded it did not.
[31]
A similar issue of
immunity, though not in the context of a tax case, was dealt with by the
British Columbia Court of Appeal in the case of British Columbia Power
Corporation Ltd. v. Attorney General of British Columbia and British Columbia
Electric Co. Ltd.
In that case, there was a statutory agency pursuant to section 6(1) of the Power
Development Act, 1961
which stated “the Company is an agent of Her Majesty the Queen in right of the
Province”. Chief Justice DesBrisay wrote:
7 The legislation in question does not purport to do more
than constitute Her Majesty the sole shareholder of the appellant company
and does not thereby vest in Her Majesty any property or funds of the appellant
nor make it Her Majesty’s agent. It is quite clear that all the property
and assets of the appellant company remain its own property and that it was the
intent of the Act that this should be so. The funds to be paid over are not
public funds. Its servants are not civil servants, it is not a government
department and its property is not Crown property.
8 In my opinion the words “an agent of Her Majesty the
Queen” as they appear in s. 6(1) cannot be taken to constitute the appellant
company an agent of the Crown except in such cases as it performs a duty for or
carries out a direction, or acts for or on behalf of Her Majesty, or deals with
or otherwise acts in respect of or holds public funds or property of Her
Majesty. It is clear, in my view, that in carrying out the directions of the
Legislature the company does not act as an agent of the Crown. …
[32]
Also, Justice Sheppard
in the same case stated:
16 As to the discovery orders, the Electric Company claims to
be an agent of the Crown and so to have come within the prerogative right of
the Crown to be immune from discovery; that is, it has become “servants of the
Crown to such an extent as to bring them within the principle of the
prerogative”: Metropolitan Meat Industry Bd v. Sheedy, [1927] A.C. 899, per
Viscount Haldane at p. 905. For that purpose the company relies upon s.
6(1) of the statute which reads: “The Company is an agent of Her Majesty the
Queen in right of the Province.” That section does not state the transactions
in respect of which the relationship of agency exists nor the powers of the
agent in dealing in those transactions: the company contends that under s. 6(1)
it has been made the agent of the Crown “for all purposes and with power to act
only as agent”.
17 That construction meets difficulties. It adds words not
found in the section and, in any event, the agency so defined does not
necessarily bring the agent within the immunity. …
[33]
Also, in the Supreme
Court of Canada decision of Northern Pipeline Agency v. Perehinec, where the issue
was whether Northern Pipeline, as a Federal agency, could only be sued in
Federal Court, Justice Estey stated:
In argument, the appellant and the respondent placed considerable
emphasis on the question as to whether the appellant was an agent of the Crown.
Indeed both of the courts below found such to be the case. For reasons which I
will later set out, I do not think the answer to that question determines the
outcome of this appeal.
…
Applying the principle of control as enunciated in the decisions of
the Privy Council and of this Court, supra, (and as applied in the British
Columbia Court of Appeal), to the statutory provisions establishing the
appellant, it would appear that the appellant is indeed an agent of the Crown,
at least in the discharge of its primary function of attending to the design,
construction and installation of the pipeline. With this I respectfully concur
in the conclusions reached in both courts below. However, as I observed at the
outset, the determination of such a status or relationship does not determine
the issue arising on this appeal. For that we must, in my view, turn to those
provisions in the statute creating the Agency which relate to its power and
authority to enter into the arrangements as described in paragraph 4 of
the statement of claim, supra.
…
Having said all that, I think that the process leads back to the
broad principle enunciated by Duff J., as he then was, in the Quebec Liquor
Commission case, supra. The liability of the statutory body to action in the
courts remains to be determined by a true interpretation of the statute in
question. There have been some examples of this process in the provincial
courts. …
[34]
I draw from these
statements that I should look to the statute (the “Education Act”)
that gives the Ontario Government the de jure control, to determine
whether there is anything therein that might connect immunity from taxation to
a school board under administration. Given the context before me is a tax on
Crown property, I must find something in the Education Act that
effectively shifts ownership of the TDSB property to the Crown. Not only do I
not find any such provision, but I find wording emphasizing quite the opposite;
that is, that ownership remains with the TDSB. There is no connection to
immunity from taxation.
[35]
Subsection 257.38(1) of
the Education Act refers to “all money belonging to the board”. Clearly,
this is a reference to TDSB money, over which the Crown had some control, but
that does not make it Crown property. This provision reinforces the position
that property remains property of the TDSB.
[36]
More significant is
section 257.43 of the Education Act, which is worth repeating at this
stage:
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.
[emphasis
added]
[37]
There are two ways of
looking at section 257.43. First, it can be viewed as a provision that acknowledges
there may be sufficient control so as to constitute a common law Crown
agency, but that statutorily, such agency is limited and does not render the
Supervisor’s acts those of the Minister, but confirms that such acts are those
of the Board. And certainly, any property acquired during the vesting period
would be property of the Board, not of the Ministry, nor acquired on behalf of
the Ministry. Again, the TDSB money was not Crown money regardless of whether
I find a common law Crown agency to exist.
[38]
A second way to view
this provision would be as an overriding antidote to the common law Crown agency,
denying such characterization altogether. The very legislation that creates the
controlling features to find a common law Crown agency, also specifically
rejects the notion of Crown agency in broad terms ‑ “all things
done” by the Supervisor are deemed to have been done by the Board.
[39]
While it is
unnecessary, given my approach, to reach a conclusion on the issue of a common
law Crown agency, I will say a few words on the issue as the Appellant spent
some time on this aspect of its argument. Firstly, there is no basis to
conclude that the TDSB was somehow subsumed into and became a part of the Ministry
of Education. It did not. The issue is whether the TDSB was an agent of the
Crown.
[40]
There are two ways in
which an entity may be found to be an agent of the Crown: either by statute or
by common law. TDSB was not designated a Crown agent by statute (indeed, as I
have indicated, quite the contrary). The common law test for the determination
of a Crown agency is based on the degree of de jure control. In the
Supreme Court of Canada decision of Halifax (City) v. Halifax Harbour Commissioner,
the Court stated the following regarding the Commissioners:
… their powers are derived from a statute of the Parliament of
Canada; but they are subject at every turn in executing those powers to the
control of the Governor representing His Majesty and acting on the advice of
his Majesty’s Privy Council for Canada, …
I cannot doubt that the services contemplated by this legislation
are, not only public services in the broad sense, but also, in the strictest sense,
Government services; or that the occupation of the Government property with
which we are concerned is, … an occupation by persons “using” that property “exclusively
in and for the service of the Crown.”
[41]
Further, in the case of
R. v. Eldorado Nuclear Ltd.,
the Court stated:
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 the
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: …
[42]
The Minister of
Education’s appointee, Mr. Christie, clearly had de facto control over
the administration and affairs of the TDSB. This was evident from his
testimony, Mr. Tomczak’s testimony and Mr. Higgins’ testimony. The Trustees
were completely without decision-making authority, as was clear from the
two memoranda from Mr. Christie setting out the restrictions on Trustees’
authority. Indeed, Mr. Christie made decisions that the Trustees themselves
could not even have made, due to his all-encompassing power and his close
association with the Conservative Government; for example, the decision to have
a deficit budget in 2003-2004 could not have been made by the Trustees. Mr.
Christie also micromanaged the affairs of the TDSB far beyond anything the TDSB
Trustees would have done. The supervisor was in control of both governance and
management-related matters. De facto control is so evident from the
evidence, I see no need to explore this in any further detail.
[43]
As indicated however,
it is not a matter of de facto control but de jure control. In
this case, I am satisfied that one flowed from the other. Division D of Part IX
of the Education Act does, as the Appellant argued, set out an
extraordinary degree of control in circumstances where a vesting order is in
place.
[44]
In summary, the
Minister has charge and control with respect to all matters. It could do
anything and indeed, through Mr. Christie, it did do everything. Again, I have
not deemed it necessary to expand on this issue of control as, firstly, I find
the legislation and circumstances point clearly to both de jure and
de facto control during both the Supervisor period and Co-management
period, and secondly, because the Respondent acknowledged: “In the present
case, while de jure control over the affairs of the Appellant
pursuant to the vesting order was absolute during the life of the order. …”
[45]
So, both sides agree
there is de jure control. The Appellant argues that such finding is
sufficient to render the TDSB a part of, or an agent of, the Ontario Government,
entitled to immunity. As I have already indicated, I do not agree that status
alone entitles the TDSB to immunity from taxation.
[46]
I find support for my
view not only in the Education Act itself, as already explained, but
also in case law. As the Supreme Court of Canada indicated in the case of Nova
Scotia Power Inc. v. Her Majesty the Queen:
14 The respondent submitted that NSPC, as an agent of the
Crown, is immune from the Income Tax Act, R.S.C. 1985, c. 1 (5th
Supp.), by virtue of s. 17 of the Interpretation Act. But the
jurisprudence imposes a second requirement before immunity from the statute in
question will inure to the Crown agent. Immunity from legislation only exists
where the entity was acting within the purposes for which the legislature made
it an agent of the Crown: see Eldorado Nuclear, supra; R. v. Canadian
Broadcasting Corp., [1983] 1 S.C.R. 339 (S.C.C.); Alberta Government
Telephones v. Canada
(Radio-Television & Telecommunications Commission), [1989] 2 S.C.R.
225 (S.C.C.).
[47]
The purposes here for a
Crown agency were to take over control and charge of the affairs of the Board –
effectively, to run the Board. It did not extend to render Board property,
Crown property. The Board had no authority, even under the control of the
Supervisor to acquire property in the name of the Province of Ontario, as its
agent or otherwise. Any Crown agency simply did not extend that far. The TDSB
sought a rebate of GST, but in doing so, it was not seeking a rebate of Crown
money.
[48]
I refer again to the case
of Halifax (City) v. Halifax Harbour Commissioner where it was clear not
only that the Commissioners were subject at every turn to great control, but
also that the property managed was Government property, which is simply not the
case before me. Chief Justice Duff stated:
To state again, in more summary fashion, the nature of the powers
and duties of the respondents: Their occupation is for the purpose of managing
and administering the public harbour of Halifax and the properties belonging
thereto which are the property of the Crown; … [emphasis
added]
…
Obviously, there is little relevant analogy between such a body and
the respondents, whose duties mainly consist in managing and administering
property which belongs to the Crown, … [emphasis
added]
[49]
In summary, the TDSB
cannot claim a rebate of money on the basis it was, as a Crown agent, spending
Crown money. It was not spending Crown money. It was not in the same
position as UPS in United Parcel Service Canada Ltd. v. R., where clearly
UPS was spending its principal’s money. The purpose of the vesting order was
not to transfer ownership of any TDSB property to the Crown: the purpose was to
put the TDSB’s financial affairs in order by giving control of the TDSB’s
affairs to a government appointee. While this may render the TDSB a Crown agent
for the period of the vesting order, it was not an agent dealing with Crown property.
While there is no need to consider the issue of standing, the Reciprocal
Taxation Agreement or Section 262 of the Excise Tax Act, I do
wish to briefly address the latter two issues.
[50]
With respect to the Reciprocal
Taxation Agreement, the parties’ argument had something of an Alice in Wonderland feel to it. I was presented with a
contract between the Government of Canada and the Province of Ontario which clearly stated that Provincial Crown
corporations or agencies agree to pay the GST (Schedule A Crown corporations
and agencies are excepted out). The TDSB was not on Schedule A, notwithstanding
the Appellant’s argument that it was a type of Crown agent that should have
been on Schedule A (an argument I did not find persuasive). The Reciprocal
Taxation Agreement struck me as a complete answer to the Appellant’s position,
yet both parties suggested that the Tax Court had no authority to enforce the
contract between Ontario and Canada,
and that is what I would be doing if I relied on the provisions of the Reciprocal
Taxation Agreement to deny the TDSB claim. 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.
[51]
Finally, with respect
to the application of section 262 of the Excise Tax Act,
I would have had no difficulty, notwithstanding the interpretation given
to that section in completely different circumstances in the case of Fanshawe College
of Applied Arts & Technology v. R.,
finding that an application for a rebate of 32% based on an error is certainly
a different matter than an application for a rebate of 68% pursuant to subsection
259(3) of the Excise Tax Act.
[52]
In conclusion, I have
found that during the vesting order period, TDSB was an agent of the Crown, yet
the authority of TDSB as a Crown agent pursuant to the Education Act did
not extend to make the property, including TDSB’s funds used by it to acquire
property and services, property of the Province of Ontario. The purpose for which the TDSB became a Crown agent
was not to divest itself of all its property, but to subject itself to the
control of its affairs by the Government of Ontario. Although this might seem
to be a fine distinction, it is a distinction nonetheless which leads to the
inevitable conclusion that the TDSB did not pay the GST by mistake. The case is
dismissed with costs to the Respondent.
Signed at Ottawa, Canada, this 20th day of January 2009.
“Campbell J. Miller”
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