Date: 20010608
Docket: 2000-3722-GST-I
BETWEEN:
ERIC KOLOTYLUK,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent,
AND
Docket: 2000-3723-GST-I
BETWEEN:
DEENA M. SZOSTAK,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
Margeson, J.T.C.C.
[1]
The facts in this case are not in dispute.
[2]
At the commencement of the trial the parties agreed upon the
Statement of Facts as set out in the Reply to the Notice of
Appeal ("Reply") with some additional facts. The
parties also agreed upon the admission of certain exhibits.
Exhibit R-1 being "Strata Plan LMS 2429";
Exhibit R-2, a plan under the Land Title Act,
document Form A registered October 1, 1998; and
Exhibit R-3, "State of Title Certificate"
with respect to the property in issue.
[3]
All of the facts set out in the Reply were admitted with the
exception of paragraphs 10(f) and (g). The parties agreed to
additional facts as referred to by counsel for the Appellant, as
follows: On January 1st, 1989 the Fraser River Harbour
Commission as lessor leased by way of a lease certain parcels or
tracts of foreshore lands and lands covered by water within the
boundaries of the Fraser River Harbour Commission to a
Mr. Daniel Wittenberg. Mr. Wittenberg acquired
possession of the lands for the purpose of constructing a
residential complex on it in the course of a commercial
activity.
[4]
Mr. Wittenberg subdivided a small portion of the foreshore lands,
comprising part of the lands into strata lots with each strata
lot having a dimension of approximately one foot by
two-and-a-half feet, by the deposit of Strata
Plan LMS 2429 in the New Westminster Land Title office. In
accordance with provisions of the B.C. Condominium Act
("Condominium Act") and the Land Title
Act the Registrar of Land Title Office issued to Mr.
Wittenberg, as a registered holder in fee simple, certificates of
title to each of the strata lots created by the strata plan. By
the deposit of the strata plan, Mr. Wittenberg assigned the lease
to the strata corporation - or a strata corporation which
allows the owners of each strata lot to have exclusive use of a
portion of the water lot as delineated by the float home moorage
areas constructed by Mr. Wittenberg.
[5]
In essence, this produced a land lot and a lot that is land
covered by water of the Fraser River. By an Agreement of Purchase
and Sale dated October 1st, 1998, Mr. Wittenberg, with
the consent of the commission, sold to
Mr. Eric Kolotyluk and Ms. Deena Szostak, the
Appellants, for the consideration of $195,000, strata lot 9 of
the strata plan. The acquisition of the strata lot gives the
purchasers, or the Appellants, the exclusive use of a floating
home slip or float home moorage.
[6]
Mr. Wittenberg treated the sale of the strata lot as a taxable
supply. He required the purchasers to pay, and he collected from
them, pursuant to section 221.1 of the Excise Tax
Act, ("Act"), Goods and Services Tax
("GST") in the amount of $13,650.
[7]
On December 23, 1998, the Appellants filed General Applications
for Rebate of GST ("Applications") with the Minister
of National Revenue ("Minister"), claiming a rebate
in the amount of $13,650 in respect of GST paid in error.
[8]
By Notices of Assessment numbered 990130152129P0003 and
990130152129P0002 dated September 7, 1999, the Minister
denied the rebates as the supply of the property was taxable and
the GST was correctly applied, pursuant to the Act.
[9]
Notices of Objection were filed on October 19, 1999. By Notices
of Decision dated March 31, 2000, the Minister confirmed the
assessments and on August 25, 2000, the Appellants filed
applications to extend the time to file Notices of Appeal. On
November 3, 2000, Orders extending the time to file Notices of
Appeal were issued and Notices of Appeal were filed at the Tax
Court of Canada on the same date.
Argument on behalf of the Appellants
[10] Section
13.2, Part I Schedule V of the Act exempts from GST the
following:
A supply, made to a person who is the owner, lessee or person
in occupation or possession of a floating home, of a right to use
mooring facilities or a wharf for a period of at least one month
in connection with the use and enjoyment of the home as a place
of residence for individuals.
In essence, the argument is that the supply of the property or
service by the condominium corporation which was received by the
owner or lessee of a residential condominium unit, at the time
the supply is made, is GST exempt.
[11] Counsel
referred to section 13 of the Act, which states as
follows:
A supply made by a condominium corporation to the owner or
lessee of a residential condominium unit in the condominium
complex managed by the condominium corporation of property or a
service relating to the occupancy or use of the unit.
Counsel argued that a conscious decision was made to
differentiate between section 13 "owner or lessee",
and section 13.2 "person who is the owner,
lessee...". Further, that if a different result had
been intended by its drafters, section 13.2 could have been
drafted to read, "A supply, made to a person who at the
time of the supply is the owner, lessee, or person in occupation
or possession of a floating home."
[12] However,
it is argued that those additional words are not incorporated
into section 13.2 of Part I of Schedule V of the Act.
Therefore, there is reason to infer that Parliament intended
that:
(1) the person to whom the supply is being made under section
13.2 need not be the owner, lessee, etcetera of a floating home
at the time that supply is made; and
(2) if a person acquires the right to use moorage facilities
prior to acquiring ownership in or the right to lease, occupy or
possess a floating home in connection with the use and enjoyment
of the home as a place of residence for individuals, then the
acquisition of the right to use moorage facilities would not be
subject to GST so long as that person then acquires ownership in
or the right to lease, occupy, or possess the floating home in
connection with the use and enjoyment of the home as a place of
residence for individuals.
[13]
Therefore, the Appellants' argument is that their purchase
of the strata lot qualifies as an exempt supply under section
13.2 and that GST was therefore collected in error.
[14] Counsel
for the Appellants rejected what he considers to be the
Respondent's position, that section 13.2 requires that the
purchaser of float home moorage must already own the floating
home to be eligible for the GST exemption. He considers that
position to be patently unreasonable because moorage facilities
for floating homes are scarce. There are very few developments
located on waterfront property which incorporate these
facilities. Developments which accommodate floating homes must be
located in areas of waterfront protected from the normal wave
patterns of open waters. A small number of homes are moored on
the protected inland side of Granville Island. The remainder are
found in a handful of developments located along the banks of the
Fraser River.
[15] Because
of its scarcity, when an interested party, clients, find float
home moorage for sale it is reasonable for them to purchase the
moorage prior to taking steps to acquire a floating home. Without
moorage the owner of a floating home runs the significant risk of
being unable to find a location at which to moor the home. Like
land-based homes, floating homes can cost hundreds of thousands
of dollars to build or buy, and like land-based homes, it would
be highly imprudent to invest in a home without first securing a
site for it. For floating homes, that site can only be found in
the form of moorage.
[16] In
essence, counsel is arguing that it would be inconceivable that
Parliament would have intended that a purchaser of
residential-float home moorage would incur the enormous
risk of obtaining a float home prior to obtaining moorage simply
to qualify for a GST exemption on the acquisition of the
moorage.
[17] In the
case at bar the Appellants acted logically. They found float home
moorage at an attractive site. They purchased the strata lot.
They then took steps to obtain rights in a floating home. This
was the most reasonable manner in which to establish their
floating home. For these actions, they should not be punished
with the denial of the GST exemption by the Respondent's
interpretation of section 13.2.
[18] Further,
counsel argued that one would be hard pressed to imagine that
Parliament intended to reward with the GST exemption only the
relatively few purchasers of float home moorage privileged enough
to already own a floating home, or the gamblers prepared to build
a home prior to obtaining the necessary moorage. There appears to
be no policy reason for which Parliament might grant these groups
the GST exemption, but deny it to the person who buys moorage
without first acquiring a home. Such a differentiation would have
no basis in reason. Section 13.2 must be interpreted
liberally.
[19] Counsel
referred to the case of John Tasko v. The Queen, [1997]
G.S.T.C. 5 where Judge Bowman addressed the issue whether a
person who builds a condominium unit should be denied the GST
housing rebate because such a unit did not fall within the
ordinary meaning of a "single unit residential
complex" indicating that the exclusion was both inadvertent
and inconsistent with the context of a new housing rebate and
that there was no reason for denying it to a person who builds a
condominium unit and yet granting it in all other circumstances.
By applying section 15 of the Interpretation Act, the
definition of "single unit residential complex" could
be ignored.
[20] Counsel
also referred to an excerpt taken by Judge Bowman from City of
Victoria v. Bishop of Vancouver, [1921] 2 A.C. 384, in
support of his proposition that the rule has always been that if
the words of an act are open to two interpretations, then they
are not clear; and if one interpretation leads to an absurdity,
and the other does not, the Court will conclude that the
legislature did not intend to lead to an absurdity, and will
adopt the other interpretation.
[21] In the
case before the Court today, counsel argued that if section 13.2
is applied in the manner suggested by the Respondent an absurdity
results, in that, a class of float home moorage purchasers who
did not previously own a float home are denied the GST rebate for
no reason.
[22] Again,
referring to Judge Bowman's discussion of the
"teleological approach" in the interpretation of
statutes, this approach requires the identification of the
telos at which the statute is aimed. In the case at bar,
the telos is to give a rebate to individuals who purchase
a right to use moorage facilities or a wharf for the use of
maintaining a floating home as a place of residence for
individuals, just as the Appellants did, the
"functional", as opposed to the "purely
mechanical" approach. This approach requires a
consideration of the scheme as a whole, taking into account the
intent of the legislation, its object and spirit and what it
actually accomplishes. The third approach is the
"words-in-total-context"
approach.
[23] In the
case before the Court today, this approach would reject the
narrow focus which the Respondent urges. In the context of the
Act as a whole, specifically when comparing the words of
sections 13 and 13.2, the Appellants should be entitled to the
rebate.
[24] Counsel
referred to the case of Stubart Investments Ltd. v. The
Queen, [1984] 1 S.C.R. 536, in support of his position that
the object and spirit of the legislation in this case is to give
an exemption to individuals who purchase a right to use mooring
facilities or a wharf for the use of maintaining a floating home
as a residence for individuals.
[25]
Additionally, counsel referred to the issue of clarity and argued
that any ambiguity in the GST provisions of the Act, which
are anything but clear, should be resolved in favour of the
taxpayer.
[26] In
essence, the ambiguity in the case at bar arises in the use of
different terms for those who receive different supplies in
sections 13 and 13.2. Different terms necessarily imply different
meanings.
[27] Lastly,
the scheme of the legislation must be considered. To
counsel's mind, the overall scheme of section 13.2 is to
grant an exemption to persons who purchase float home moorage
where they will keep a floating home as a residence for
individuals. By these rules the applicant should be entitled to
the GST exemption.
[28] In
Tasko, supra, Judge Bowman (as he then was) went on to
say:
Section 15 of the Interpretation Act directs us,
in forceful and unequivocal terms, not to apply interpretation
sections mechanically. I regard the words "as being
applicable only if a contrary intention does not
appear". (emphasis added)
[29] This
counsel's position is that the granting of an exemption in
all other circumstances with no other apparent reasons for
denying it to a person who purchased float home moorage prior to
obtaining rights in a floating home, appears to indicate a
statutory context from which contrary intention may be
inferred.
[30] Counsel
went on to point out excerpts from the case of Stubart
Investments Ltd., supra, with respect to the rules of
statutory interpretation whereby any ambiguities in the charging
provisions of a tax statute are to be resolved in favour of the
taxpayer. The rule requires that the words of an act be read in
their entire context and in their grammatical and ordinary sense
harmoniously with the scheme of the act to determine the object
of the act and the intention of Parliament.
[31] Counsel
also referred to the case of Johns-Manville Canada v. The
Queen, [1985] 2 S.C.R. 46, at page 61 where the Court, when
referring to the case of Regent Oil Co. v. Strick, [1966]
A.C. 295, at page 313 said:
So it is not surprising that no one test or principle or rule
of thumb is paramount. The question is ultimately a question of
law for the court, but it is a question which must be answered in
the light of all the circumstances which it is reasonable to take
into account, and the weight which must be given to a
particular circumstance in a particular case must depend rather
on common sense than on strict application of any single legal
principle.
(Emphasis added)
[32] In
conclusion, counsel took the position that the difference in the
drafting of sections 13 and 13.2 would imply contrary intentions
by the drafters. The view which conforms more closely to the
object, spirit and scheme of section 13.2, would be that which
would allow for the person to be either a present or future owner
or lessee of a floating home so long as he or she were to use the
moorage as a place of residence for individuals, to be entitled
to the GST exemption upon the acquisition of the moorage
rights.
[33] Counsel
submitted that the appeal should be allowed with costs.
Argument on behalf of the Respondent
[34] Counsel
for the Respondent characterized the Appellants' position
as limiting this case to one issue alone and that was the
question of timing in determining whether or not section 13.2
applied regardless of whether the Appellants were owners, lessees
or in possession of a floating home at the time that the right
was purchased. However, the Reply was not limited to that issue
and, in the Respondent's submission, there are two issues:
First, can the sale of the strata lot to the purchasers in this
case be characterized merely as the supply of a right to use
mooring facilities or a wharf within the meaning of section 13.2?
Second, if so, then does section 13.2 apply to the supply of a
right to use mooring facilities or a wharf to a purchaser who is
not the owner, lessee or person in occupation or possession of a
floating home at the time the supply is made? The
Respondent's position was that the answers to both of these
questions is no.
[35] He then
commenced discussion of the various provisions of the Act
which must be satisfied in order for his interpretation to be
accepted including supply, taxable supply and commercial
activity. However, counsel for the Appellants did not contest
these preliminary matters and put the issue merely as the
transaction not being taxable because it was an exempt
supply.
[36] Counsel
for the Appellants argued that there were a number of supplies
made here, only one of which was the right to moor. He quoted
section 136 which states as follows:
For the purposes of this part, a supply by way of lease,
license or similar arrangement of the use or right to use real
property or tangible personal property shall be deemed to be a
supply of real property or tangible personal property as the case
may be.
[37] Under
this definition of real property are included a wide range of
rights to use real property.
[38] He then
turned his attention to the first issue as to whether or not the
purchase of the lot can be properly characterized as a mere
supply of a right to use mooring facilities or a wharf.
[39] He
referred to the Condominium Act, Revised Statutes
Chap. 64 to describe what interests were transferred to the
Appellants when they obtained the strata lot. Section 2 of the
Condominium Act states:
Land may be subdivided into strata lots by the deposit of a
strata plan, and the strata lots so created, or any one or more
of them, may, subject to this Act, devolve or be disposed of in
the same manner and form as any land the title to which is
registered in a land title office.
[40] A
certified copy of the Strata Plan LMS 2429,
Exhibit R-1, was deposited in accordance with the
Act. There is no dispute that the Appellants purchased a
strata lot created by this plan, namely the lot shown as lot 9 on
the plan. Thus, under section 2, this lot may be disposed of in
the same manner and form as any other land, including a
disposition in fee simple.
[41] Further,
Exhibit R-3 was a certified copy of the State of Title
Certificate for lot 9. It states that the two Appellants in these
cases are the registered owners as joint tenants in fee simple of
lot 9. A land transfer document, which is also in evidence, is to
the same effect, that there was a transfer in fee simple.
[42] One of
the things that the Appellants bought in this transaction is fee
simple title to lot 9 in the strata as joint tenants.
[43] Under the
definition of "owner" in the Condominium Act,
the Appellants were the owners of lot 9 at the strata lot.
[44] Section
13 of the Condominium Act, in particular section 13(2)
states that:
The owners of the strata lots included in a strata plan and
their successors, on deposit of the strata plan in a land title
office, constitute and are members of a corporation under the
name "The Owners, Strata Plan No. ..." (the
registration number of the strata plan).
Therefore, the Appellants, as owners of strata lot 9, have
purchased, along with their strata lot, memberships in the strata
corporation. As provided throughout the Condominium Act,
this gives the Appellants various rights regarding the business
of the strata corporation, including voting rights and the
like.
[45]
Subsection 12(1) of the Condominium Act provides as
follows:
The common property, common facilities and other assets of the
strata corporation must be held by the owners as tenants in
common in shares proportional to the unit entitlement of their
strata lots.
[46] According
to Strata Plan LMS 2429, Exhibit R-1, the strata plan
shows a map of the property of the strata. This is not water. The
water lot is located somewhere near the property. This is the
actual fee simple land that was owned by the strata corporation.
The entire triangle is common property. Counsel opined that that
is where the garage and parking lot were located and possibly
other improvements although there was no evidence on that point.
However, the Appellants, by virtue of subsection 12(1) of the
Condominium Act have bought interests in the entire fee
simple property owned by the strata corporation.
[47] The
evidence further shows that the Appellants purchased exclusive
rights to use a parking stall on the strata property and
exclusive rights to use a garage located on the strata property.
Further, it was agreed that the Appellants purchased the
exclusive right to use a section of the water lot leased by the
strata corporation in the Fraser River although no evidence was
introduced as to the exact nature of what the Appellants were
entitled to use on this lot, whether it was merely the right to
moor their home on that lot, or whether they had exclusive use
and possession of the entire lot.
[48] In
summary, therefore, the Respondent submitted that the Appellants
purchased the following bundle of rights under the contract of
purchase and sale in this case: fee simple to strata lot 9; a
membership in the strata corporation; an interest in the common
property of the strata; the right to use one parking stall; the
exclusive right to use a garage in the limited common property
areas of the strata; and the exclusive right to use an area of
land under water leased by the strata corporation.
[49] Counsel
then proceeded to a consideration of the principles of the
interpretation of Statutes and pointed out that he could not find
any authorities specifically addressing subsection 13.2. He
referred to the case of Corporation Notre-Dame de
Bon-Secours v. Québec, [1995] 1 C.T.C. 241 at
page 250, where Justice Gonthier stated:
In light of this passage there is no longer any doubt that the
interpretation of tax legislation should be subject to the
ordinary rules of construction. At page 87 of his text
Construction of Statutes (2nd ed. 1983),
Driedger fittingly summarizes the basic principles:
"...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". The first consideration should
therefore be to determine the purpose of the legislation, whether
as a whole or a expressed in a particular provision. The
following passage from Vivien Morgan's article
"Stubart: What the Courts Did Next" (1987), 35
Can. Tax J. 155, at pages 169-70, adequately summarizes my
conclusion:
There has been one distinct change [after
Stubart], however, in the resolution of ambiguities. In
the past, resort was often made to the maxims that an ambiguity
in a taxing provision is resolved in the taxpayer's favour
and that an ambiguity in an exempting provision is resolved in
the Crown's favour. Now an ambiguity is usually resolved
openly by reference to legislative intent.
[Emphasis added.]
The teleological approach makes it clear that in tax matters it
is no longer possible to reduce the rules of interpretation to
presumptions in favour of or against the taxpayer or to
well-defined categories known to require a liberal, strict
or literal interpretation. I refer to the passage from Dickson
C.J., supra, when he says that the effort to determine the
purpose of the legislation does not mean that a specific
provision loses all its strictures. In other words, it is the
teleological interpretation that will be the means of identifying
the purpose underlying a specific legislative provision and the
Act as a whole; and it is the purpose in question which will
dictate in each case whether a strict or a liberal interpretation
is appropriate or whether it is the tax department or the
taxpayer which will be favoured.
[50] At page
251, Justice Gonthier summarizes his conclusions on the statutory
interpretation by saying:
The rules formulated in the preceding pages, some of which were
relied on recently in Symes v. Canada, [1993] 4 S.C.R.
695, [1994] 1 CTC 40, 94 DTC 6001, may be summarized as
follows:
The interpretation of tax legislation should follow the
ordinary rules of interpretation;
A legislative provision should be given a strict or liberal
interpretation depending on the purpose underlying it, and that
purpose must be identified in light of the context of the
statute, its objective and the legislative intent; this is the
teleological approach;
The teleological approach will favour the taxpayer or the tax
department depending solely on the legislative provision in
question, and not on the existence of predetermined
presumptions;
Substance should be given precedence over form to the extent
that this is consistent with the wording and objective of the
statute;
Only a reasonable doubt, not resolved by the ordinary rules of
interpretation, will be settled by recourse to the residual
presumption in favour of the taxpayer.
[51] Counsel
then turned to consideration of subsection 13.2. By his
interpretation of this section, what is contained in the
exemption essentially is a supply of a right to use mooring
facilities or a wharf. Purchase of the strata lot here included
much more than that. It included fee simple title to the lot, a
membership in the strata corporation, an interest in the common
property and the right to use certain portions of a limited
common property exclusively. None of these rights constitute a
mere right to use a mooring facility or a wharf. Furthermore,
there was no evidence as to the exact nature of the rights in the
leasehold interest of the water lot. There is no evidence that
the right supplied to the Appellants is simply the right to moor
a floating home there.
[52] The
Respondent submitted that without further evidence of the nature
of the Appellants' rights of the use of that lot, the Court
should not find that it consists merely of the right to moor the
floating home. If anything, the evidence indicates that the
Appellants are entitled to exclusive use and enjoyment of the
lot, and all the common-law rights that come with such an
exclusive use and enjoyment, such as rights to quiet possession
and so forth.
[53] Counsel
then turned to the context of section 13.2. It was his position
that the placement of section 13.2 within Part I of Schedule V
reinforces the Respondent's position that the section does
not apply to exempt the supply of the real property in issue.
Section 13.2 is part of a group of sections in the schedule which
goes from section 13 to section 13.4. These sections provide
exemptions for certain types of supplies, such as fees paid to
the strata corporation for the upkeep of the property. Section
13.1 provides a similar exemption for fees paid by persons living
in a co-op, section 13.3 exempts the right to use a washing
machine or clothes dryer located in a common area of the
residential complex, and section 13.4 exempts the use of a
laundry facility and to exempt any charge that they would need to
pay in order to use those facilities.
[54] All of
these sections relate to various services provided to people who
live in a multi-dwelling complex such as a condominium, or a
co-op and which are normally paid for with a monthly service fee.
It is no accident that section 13.2 falls in the middle of
these sections. The intent of section 13.2, as revealed by its
context in the legislation, is to exempt from GST, GST moorage
fees in the nature of a monthly service charge paid, for example,
by a strata lot owner to the strata corporation in exchange for
the right to moor and the various expenses that are required to
maintain the docking facilities. The intention was not to exempt
the supply of an entire strata lot and all the accompanying
rights simply because the strata involves a place to moor a
floating home.
[55] Further,
if the Appellant had bought a floating home along with the strata
lot, it is obvious that they would have purchased more than a
mere right to moor the floating home, and there is no way that
the entire purchase of the lot could have fallen under section
13.2. Here it so happens that they have purchased everything but
the floating home.
[56] It was
not the intention of Parliament to exempt the purchase of the
entire lot from GST simply because the Appellants chose to
purchase a floating home elsewhere and bring it on to the
lot.
[57]
Therefore, on the first issue, the purchase of the entire strata
lot cannot be characterized as a mere supply of a right to moor a
floating home and so the supply is not exempt under section 13.2
of Part I of Schedule V.
[58] In any
event, if the Court should find that "supply" can be
characterized as a supply of a right to moor a floating home,
then the Respondent submits that section 13.2 does not apply
because at the time the Appellants purchased the strata lot they
did not have a floating home.
[59] The plain
language of the section and the verb tense used indicates that in
order to fall under this exemption, supply of the right to moor
must be made to a person who is, at the time when the supply is
made, the owner, lessee or person in possession of a floating
home. In this case it is admitted that the Appellants did not
own, lease, and were not in possession of a floating home at the
time of the transfer of title and therefore the supply of the
right does not fall under section 13.2.
[60] In the
event that the Court should find that the supply was exempt, the
amount refundable to each Appellant should be one-half of the GST
initially paid on the lot.
[61] This
position was not disputed by counsel for the Appellants.
[62] The
appeals should be dismissed.
Analysis and Decision
[63] As
indicated in the summary of the Agreed Statement of Facts in this
matter there is really no dispute as to the facts. Other facts
were settled by the introduction of the various exhibits and no
real issue was taken as to what those exhibits stood for. Counsel
for the Appellants made little reference to these documents but
counsel for the Respondent rightly pointed out that his
interpretation of what the documents establish was not contested
by counsel for the Appellants.
[64] The
position of counsel for the Appellants was that based on the
reading of section 13.2 it is reasonable to infer the legislature
intended that: (1) the person to whom the supply is being made
under section 13.2 need not be the owner, lessee etc. of a
floating home at the time the supply is made; and (2) if a person
acquires the right to use moorage facilities prior to acquiring
ownership in or the right to lease, occupy or possess a floating
home in connection with the use and enjoyment of the home, as a
place of residence for individuals, then the acquisition of the
right to use moorage facilities would not be subject to GST so
long as that person then acquires ownership in or the right to
lease, occupy or possess the floating home in connection with the
use and enjoyment of the home as a place of residence for
individuals.
[65] Counsel
for the Respondent has taken the position that what the
Appellants are really arguing is a question of timing whereas the
Respondent's position was that there are really two issues
involved in this case. Firstly, can the sale of the strata lot to
the purchasers in this case be characterized merely as a supply
of a right to use mooring facilities or a wharf within the
meaning of section 13.2 and; secondly, if so, then does section
13.2 apply to a supply of a right to use mooring facilities or
wharf to a purchaser who is not the owner, lessee or person in
occupation or possession of a floating home at the time the
supply is made. The Respondent's position was that the
answer to both these questions was no.
[66] It is
interesting to note that counsel for the Appellants, in his
argument contained at page 12 of the transcript, appears to be
referring to the taxable portion as only the acquisition of the
right to use the moorage facilities, which is what the section
talks about, and not the cost of whatever else the Appellants may
have purchased. This may have been a freudian slip only but in
any event it was addressed by counsel for the Respondent in his
argument.
[67] It would
appear to the Court that what the Appellants are really arguing
is that a reasonable interpretation of section 13.2 entitles the
Appellants to be exempt not only for the value of the right to
use moorage facilities but to be exempt for all of the value of
all of the rights that the Appellants purchased even though the
right to use the moorage facilities was purchased before the
Appellants purchased the remaining rights which have been
referred to.
[68] In order
for the Appellants to be successful on this basis they must
satisfy the Court on a balance of probabilities that section 13.2
exempts not only the cost of obtaining the moorage facilities but
that a reasonable interpretation of the section also should mean
that when the Appellants obtained the subsequent propriety
rights, the value of such rights would also be exempt under
section 13.2 on the basis that they had acquired the moorage
facilities rights originally as practical and reasonable
purchasers who did not want to go to the expense of purchasing a
floating home first, as it may turn out that they would not be
able to gain the moorage facilities and therefore their
investment would be wasted.
[69] This
Court concludes that simply put the issues boil down to the
following:
(1) What did the Appellants purchase? (2) When did the
Appellants make the purchases? (3) What is the significance of
the timing of the purchases? (4) Can the provisions of section
13.2 be reasonably interpreted to allow a person who is the
purchaser of the right to use moorage facilities or a wharf
enable such a purchaser to avoid paying GST on the costs of other
rights or propriety interests that he may acquire, even at a
different time on the basis of fairness? It was argued that there
appears to be no policy reason for which Parliament might grant
an exemption to one group but deny it to another because he or
she acquired the moorage facilities first. It was argued that
such a differentiation would have no basis in reason.
[70] Towards
the end of his argument, counsel for the Respondent made a
significant point, that if the Appellants in this case had bought
a floating home along with the strata lot, it is obvious that
they would have purchased more than the mere right to moor their
floating home, and there is no way that the entire purchase of
the lot could have fallen under section 13.2. In the
Respondent's submission, it was not the intention of
Parliament to exempt the purchase of the entire lot from GST
simply because the Appellants chose to purchase a floating home
elsewhere and bring it on to the lot.
[71] Both
parties canvassed the applicable law on statutory interpretation.
After considering all of those cases and the arguments made by
both counsel, it is the Court's position that it must make
every effort to determine the purpose of the legislation. It must
use the teleological interpretation to identify the purpose
underlying the legislative provisions in the Act as a
whole and it is such purpose that will dictate in each case
whether a strict or liberal interpretation is appropriate, or
whether it is the tax department or the taxpayer which will be
favoured. Thus, the Court should follow the ordinary rules of
interpretation. The Court must find the purpose underlying the
specific provision in light of the context of the statute, its
objective and the legislative intent. This is what is meant by
the teleological approach. There are no pre-determined
presumptions in favour of or against either party. It is only
when a reasonable doubt is not resolved by the ordinary rules of
interpretation where recourse will be given to a residual
presumption in favour of the taxpayer.
[72] In the
case at bar the Court can find no ambiguity in section 13.2. It
appears to be clear that the intention of this section was to
provide an exemption from GST "of a right to use moorage
facilities or wharf for a period of at least one month in
connection with the use and enjoyment of the home as a place of
residence for individuals". This section clearly talks
about use of the moorage facilities and not a floating home or
other rights which the taxpayer might purchase in conjunction
with the use of the moorage facilities. Further, it would appear
clear from this section that the supply that is talked about is a
supply that is made to a person who is the owner, lessee or
person in occupation or possession of a floating home.
[73] There can
be no doubt that in the case at bar the Appellants were not such
persons at the time they purchased the right to use moorage
facilities. Consequently, with respect to the second question
posed by counsel for the Respondent, the Court agrees with the
Respondent's interpretation and concludes that section 13.2
does not apply to a supply of a right to use moorage facilities
or a wharf to a purchaser who is not the owner, lessee or person
in occupation or in possession of a floating home at the time the
supply was made. No matter how liberal an interpretation the
Court gives to the section it cannot conclude that the Appellants
here were purchasers, were the owners, lessees or persons in
occupation or possession of a floating home at the time the
supply was made.
[74] The Court
agrees with counsel for the Respondent that the activities of the
Appellants included more than a simple purchase of a plot of
land. One has to determine what interest was transferred to the
Appellants, bearing in mind the evidence presented in the
documents submitted into evidence including the Condominium
Act, the Strata Plan MLS 2429 and the State of Title
Certificate for lot 9.
[75] As argued
by counsel for the Respondent, the Court is satisfied that the
Appellants acquired fee simple title to lot 9 in the strata as
joint tenants. Further, the documents indicate that the
Appellants, as owners of strata lot 9, purchased, along with
their strata lot, memberships in the strata corporation. Under
the Condominium Act this gave the Appellants various
rights regarding the business of the strata corporation,
including voting rights and the like. Further, under the
provisions of section 12(1) of the Condominium Act:
The common property, common facilities and other assets of the
strata corporation must be held by the owners as tenants in
common in shares proportional to the unit entitlement of their
strata lots.
[76] Further,
under the Strata Plan MLS 2429, Exhibit R-1, the Court
can only conclude that the Appellants acquired actual fee simple
land that was owned by the strata corporation. This was not the
water lot which was located somewhere near the property. In light
of the fact that there was no other evidence that the Appellants
had acquired anything less, the Court has to conclude that on the
basis of section 12(1) of the Condominium Act the
Appellants acquired an interest in the entire fee simple property
owned by the strata corporation.
[77] Further,
evidence showed that the Appellants purchased the exclusive
rights to use a parking stall on the strata property and
exclusive rights to use a garage located on the strata property.
They also purchased exclusive rights to use a section of a water
lot leased by the strata corporation in the Fraser River. Again
there was no evidence submitted as to the exact nature of what
the Appellants were entitled to use on this lot or any
limitations thereon and it may have been merely the right to
moore their home on that lot or they may have had something
more.
[78] As
characterized by counsel for the Respondent, it would appear
clear that the Appellants purchased the following rights under
the contract of purchase and sale in this case: fee simple to
strata lot 9; a membership in the strata corporation; an interest
in the common property of the strata; the right to use one
parking stall; and the exclusive use to the garage in the limited
common property areas of the strata and an exclusive right to use
an area of land underwater leased by the strata corporation.
[79] Counsel
for the Appellants argued that a conscious decision was made to
differentiate between section 13 "owner" or
"lessee" and subsection 13.2 "person who is the
owner, lessee or person in occupation or possession of a floating
home". On that basis he argued that if the legislators had
wanted to create a different result than that proposed by the
Appellants, subsection 13.2 could have been drafted to read:
"supply made to a person who at the time the supply was
made is the owner, lessee or person in occupation or possession
of a floating home". The Court has great difficulty in
concluding that that would have made any difference or that it
could possibly have had the effect proposed by the
Appellants.
[80] Counsel
for the Respondent referred to the context of section 13.2. It
was his submission that the placement of section 13.2 within Part
I of Schedule V reinforces his position that the section
does not apply to exempt the supply of real property in issue.
This section was part of a group of sections which provides
specific exemptions and might exempt monthly fees paid to the
strata corporation for the upkeep of the property. Section 13.1
provides a similar exemption for fees paid by persons living in a
co-op. Again counsel pointed out that all these sections relate
to various services provided to people who live in multi-dwelling
complexes such as a condominium complex or a co-op which are
normally paid for with the monthly service fee. These submissions
are not without merit.
[81] Section
13.2 falls in the middle of these sections and is intended to
exempt from GST, GST moorage fees in the nature of a monthly
service charge paid by the strata lot owners to the strata
corporation in exchange for the right to moor and the various
expenses that are required to maintain the docking facilities.
The intention was not to exempt the supply of an entire strata
lot and all the accompanying rights simply because a strata lot
involves a place to moor a floating home.
[82] Further,
although it is not essential for the decision in this case, the
Court is satisfied that if the Appellants in this case had bought
a floating home along with the strata lot, they would have
purchased more than the mere right to moor the floating home and
the provisions of section 13.2 would not have acted to exempt the
entire purchase rights from the application of GST.
[83] As argued
by counsel for the Respondent, it was not the intention of
Parliament to exempt the purchase of the entire lot from GST
simply because the Appellants chose to purchase a floating home
elsewhere and bring it on to the lot.
[84] In regard
to the first issue as proposed by counsel for the Respondent, the
Court agrees that the purchase of the entire strata lot cannot be
characterized as the mere supply of a right to moor a floating
home and consequently the supply in this case is not exempt under
section 13.2 of Part I, Schedule V. Further, on issue two, the
Court is satisfied that section 13.2 does not apply because at
the time the Appellants purchased the strata lot they did not
have a floating home.
[85] Insofar
as the Court is concerned the language of the section is plain
and unambiguous and the verb tense which is used in the section
leads no doubt as to when it is to apply. In this case, it is
clear that at the time when the supply was made the Appellants
did not own, lease, and were not in possession of a floating home
at the time of the transfer title and therefore the supply of the
right does not fall under section 13.2.
[86] It may
not be a very good analogy but what the Appellants are seeking in
this particular case would be tantamount to a purchaser buying a
new motor vehicle and having no trade-in for it, then sometime
later coming back to the dealership, trading-in another motor
vehicle and asking that the value of this motor vehicle be
deducted from the value of the new motor vehicle so that his tax
would be less. It is clear to the Court that the time about which
the legislation is speaking is the present tense. It does not
apply to subsequent acquisitions. Such an interpretation does not
lead to an absurd result as contemplated by Judge Bowman in
Tasko, supra.
[87] The
appeal is dismissed and the Minister's assessment is
confirmed.
Signed at Ottawa, Canada, this 8th day of June
2001.
"T.E. Margeson"
J.T.C.C.
COURT FILE
NO.:
2000-3722(GST)I
2000-3723(GST)I
STYLE OF
CAUSE:
Deena Szostak and Eric Kolotyluk
and Her Majesty the Queen
PLACE OF
HEARING:
Vancouver, British Columbia
DATE OF
HEARING:
April 11, 2001
REASONS FOR JUDGMENT BY: the
Honourable Judge T.E. Margeson
DATE OF
JUDGMENT:
June 8, 2001
APPEARANCES:
Counsel for the
Appellants:
Quentin J. Adrian
Counsel for the
Respondent:
Jason Leslie
COUNSEL OF RECORD:
For the
Appellants:
Name:
Adrian & Co.
Firm:
Barristers & Solicitors
5660 Yew Street
Vancouver, B.C. V6M 3Y3
For the
Respondent:
Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
2000-3722(GST)I
BETWEEN:
ERIC KOLOTYLUK,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeal heard on common evidence with the appeal
of Deena M. Szostak (2000-3723(GST)I) on
April 11, 2001, at Vancouver, British Columbia, by
the Honourable Judge T.E. Margeson
Appearances
Counsel for the
Appellant:
Quentin J. Adrian
Counsel for the
Respondent:
Jason Leslie
JUDGMENT
The
appeal from the assessment made under Part IX of the Excise
Tax Act, notice of which is dated September 7, 1999 and
bears number 990130152129P0003, is dismissed in accordance with
the attached Reasons for Judgment.
Signed at Ottawa, Canada, this 8th day of June
2001.
J.T.C.C.
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