Date: 20000822
Docket: 2000-356-GST-I
BETWEEN:
HEATHER L. EARNSHAW and LINDA M. THRONESS,
Appellants,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
Sarchuk J.T.C.C.
[1] This is an appeal by Heather Louise Wassink (nee Earnshaw)
and Linda M. Throness from an assessment made by the
Minister of National Revenue (the Minister) on May 18, 1999
denying their application for rebate of goods and services tax
(GST).
[2] There is general agreement regarding the following facts.
A developer leased a large area of undeveloped property and
improved the property with residential buildings. On May 20,
1993, the Appellants purchased, as a personal residence, an
interest in a leasehold condominium at 104-5835 Hampton Place
from Polygon Development VIII Ltd. (Polygon). This interest was
acquired by way of assignment of one of the stratified leases
converted from the developer's lease when the Appellants
acquired the residential strata unit from Polygon. The purchase
price was $229,900. Upon closing, the Appellants also paid to
Polygon net GST of $10,299.52 (GST of $16,093 less a GST New
Housing Rebate assigned by the Appellants to Polygon of
$5,793.48). A General Application for Rebate of GST was filed by
the Appellants and received by the Minister on February 9, 1999.
By notice of assessment dated May 18, 1999, the Minister denied
the rebate on the basis that "the application was not filed
within the prescribed time limit provided by section 261 of the
Excise Tax Act.
[3] Evidence was also adduced from Heather Louise Wassink (nee
Earnshaw), Raymond Takyan Ng (Ng)[1] and from Ricky Wong (Wong). Wassink testified
that she and Throness purchased their condominium in May 1993 and
at the time of its acquisition were required by the developer to
pay GST. In or about May 1995, the strata council for St.
James House on Hampton Place organized a meeting with an
accountant with respect to possible applications for GST rebates.
Throness attended and after hearing the discussions decided to
apply for the GST rebate. The Appellants commenced putting
together all of the necessary paperwork the accountant needed.
They knew many of the people residing in similar strata units
and, while in the midst of organizing this material, heard that a
number of these individuals had received "letters from
Revenue Canada saying that the GST was not due back to us".
Wassink said the number of such reports was sufficient to lead
the Appellants to stop the process and not proceed with their
application for a rebate. In July 1996, the Appellants sold their
strata unit and moved. Subsequently, in late 1998 or early 1999,
they heard "through the grapevine" that "friends
had now gotten money back" and learned that others in that
community were also pursuing the issue.[2] This information prompted them to
complete and submit their application for rebate.
[4] Ng purchased two units in Hampton Place in 1993, one as
his primary residence and the other as a rental unit. On the
advice of his solicitor he contacted Revenue Canada to determine
whether GST had to be paid and was advised that 7% GST was to be
paid on the rental property but would only qualify for a 2.5%
rebate with respect to the residence.[3] In 1995, he attended a meeting at
which an accountant addressed a number of the strata unit
residents with regard to the GST issue and offered his assistance
for the purpose of filing rebate applications. Uncertain as to
whether he should retain the accountant, Ng again approached
Revenue Canada for information and specifically asked whether it
would be "meaningful for me to file this claim". He
said the official produced "some documentation that, in
fact, everybody needs to pay GST" and recalled that
"the official was very confident that I would just be
wasting my money" retaining someone to file his application.
Acting on these statements, he decided not to proceed with his
application. Ng noted that the rebate issue was a recurring topic
of conversation amongst the residents but conceded that he had no
specific recollection of informing the Appellants regarding his
experiences with Revenue Canada or with respect to the advice he
received from its employees.
[5] Wong, a Vancouver businessman, purchased a strata unit in
Hampton Place and lived there until 1998. A short time following
his departure, one of his former neighbours contacted him with
respect to the GST issue and suggested that he file an
application for rebate. He also learned that an application form
would have to be filed by June 30, 1998. Wong said he was
unsure as to what was needed and went to Revenue Canada for
information. The advice he received was that there was not much
likelihood of success in claiming a General Rebate but that he
was probably entitled to a New Housing Rebate and was given
application forms for that purpose. He specifically recalled
asking the Revenue Canada official what would happen if the
Appellants Taylor and Redmond were successful and this
decision was handed down after June 30, 1998, the expiry of his
four-year limitation period. He says the response was "if
they win, everybody will get everything".
Legislative Scheme
[6] The relevant provisions of the Act in effect on
February 9, 1999 when the Appellants filed their General
Application for Rebate read as follows:
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.
...
261(3) A rebate in respect of an amount shall not be paid
under subsection (1) to a person unless the person files an
application for the rebate within two years after the day the
amount was paid or remitted by the person.
Subsection 261(3) as it read at that time reflected an
amendment made in 1997 reducing the prior limitation period from
four years to two years. The amendment further provided that:
71(2) Subsection (1) applies
(a) to amounts that, after June 1996 are paid as or on
account of, or are taken into account as tax or other amount
payable or remittable under Part IX of the Act; and
(b) to amounts that, on or before the last day of that
month, were paid as or on account of, or were taken into account
as tax or other amount payable or remittable under that part,
other than amounts that are claimed in an application under
section 261 of the Act filed on or before June 30, 1998.
[4] [5]
Appellants' position
[7] Counsel for the Appellants argued that the Minister is
estopped from denying their claim for a rebate by asserting that
their application is statute-barred by reason of being out
of time. He argued that if their application is statute-barred,
their failure to file within the requisite time was the result of
negligent advice given by the Minister's servants and agents
prior to the expiration of the limitation period that they were
not entitled to a rebate.
[8] Counsel conceded that these Appellants could be
distinguished from Braxton and Diane Alfred in that they were
unable to identify a specific incident where an officer or agent
of Revenue Canada provided them with erroneous information with
respect to their right to a General Rebate. However, he contends
that by the latter part of 1995, it was common knowledge amongst
all of the people who had purchased the strata units in issue
that Revenue Canada's position was that they were not
entitled to the rebate. He argued that it was sufficient that
Earnshaw and Throness had been advised of this position by others
and believed that implicit in Revenue Canada's position was
that they should not make an application because it would not be
successful. Counsel further submitted that the Appellants, being
aware of Revenue Canada' position, acted on it and concluded
that making an application would be a waste of time. Thus,
relying on the correctness of the expressed Revenue Canada
position, they failed to submit their application within the time
period prescribed.
[9] In the alternative, the Appellants rely on the decision in
Taylor and Redmond v. The Queen in which Garon C.J.T.C.C.,
in identical circumstances, held that the Appellants'
acquisition of their respective residential units was exempt from
tax under Part IX of the Act and accordingly, the
Minister's assessment to deny them a rebate of taxes paid in
error was vacated. Since this decision was handed down on July
27, 1998 the Appellants contend that their right to file a
General Application for Rebate was postponed effective as of that
date. In support of this position, counsel for the Appellants
submitted that the appropriate interpretation of subsection
261(1) can be ascertained by reading subsections (1) and (3)
together and utilizing subsection (1) in determining what was
meant by the phrase "within two years after the day the
amount was paid or remitted by the person". He contends that
it is necessary to import into the meaning of subsection (3) the
concept of "was not payable or remittable by the
person" from subsection (1). When read in this fashion and
accepting the fact that the Appellants did not learn that the
amount in issue "was not payable" by them until such
time as the Taylor and Redmond decision was handed down,
at that point i.e. July 27, 1998, if the statutory
limitation did in fact apply, they had two years within which to
make their application. Counsel submitted that interpreting the
words referred to in this fashion does not violate the plain
meaning and intent of the statute but interprets the law in a
creative fashion in order to enable the Court to interpret the
relevant sections in a manner which provides relief for the
Appellants.[6]
[10] In support of this interpretation of a taxing statute,
reference was made by counsel to the decision of Madame Justice
Reed in Smith Drugs Ltd. v. M.N.R.[7] wherein she stated:
With respect to the statements in Fries v. M.N.R.,
(1990) 114 N.R. 150; 90 DTC 6662 (S.C.C.) and Johns-Manville
Canada Inc. v. M.N.R., (1985) 60 N.R. 244; 85 DTC 5373
(S.C.C.) which indicate that in cases of uncertainty the taxpayer
must be given the benefit of the doubt, I do not interpret those
comments as in any way resiling from the principle set out in
Stubart. In my view, those cases merely indicate that if
after one has read the relevant statutory provisions of an
Act and read them in light of the purpose and object of
the statute, there is still doubt as to which alternative
interpretation was intended, then, that doubt should be resolved
in favour of the taxpayer, regardless of whether the provision in
question is a charging section or an exemption or deduction
provision.
[11] Subsequent to the hearing of the appeal, Mr. Harkness
filed supplementary submissions in which he argued that a
reasonable interpretation of subsection 261(3) of the
Act suggests that a person subject to the provisions of
the Act is, in the usual case, aware of a sale of a
taxable supply that did not go through, remained unpaid or was
consumed outside of Canada. In such circumstances, GST would not
be payable and the person would apply for a rebate of GST
remitted on the sale within the limitation period. On the other
hand, a person would not normally know that a rebate of an exempt
supply collected in error by Revenue Canada is possible until a
Court determines that the supply is exempt. In the case of these
Appellants, the determination that the supply of their leasehold
interest was an exempt supply was not made until the Taylor
and Redmond decision which was handed down after the
limitation period had expired. Relying on a recent decision of
the British Columbia Court of Appeal (BCCA), Hansen v. The
Queen,[8]
counsel argued that subsection 261(3) may be interpreted as a
limitation that is procedural in nature because it determines
that a person make the application for a rebate when the person
becomes aware of circumstances in which the GST would not be
payable. In Hansen, the BCCA held that a limitation that
is procedural in nature can be extended by agreement or estoppel.
Thus, counsel says, Revenue Canada by accepting that purchasers
were entitled to rebates but only after the Taylor
decision was handed down, effectively agreed to extend the
commencement of the limitation period to the date of the decision
i.e. July 27, 1998.
Conclusion
The estoppel argument
[12] On the evidence, it is reasonable to conclude that it was
generally known that a dispute existed between purchasers of
strata units and Revenue Canada regarding the "rebate
issue" and that Revenue Canada was reconsidering its
position. It is also a fact the Appellants became aware of their
potential entitlement to a rebate at the very latest in May 1995
when Throness attended a general meeting and left satisfied that
an application for a General Rebate was warranted. At some point
of time shortly thereafter, the Appellants also learned that
Revenue Canada officials had advised a number of purchasers that
they were not entitled to rebates. Accepting that determination
as correct directly led the Appellants to abandon their efforts
to claim a rebate at a point of time when they still were within
the statutory limitation period.
[13] Although it is clear that the Appellants acted to their
detriment as a result of the advice received, they cannot succeed
on this ground. Issue estoppel has been considered in a number of
cases and the principle which can be taken therefrom is that no
representation involving an interpretation of law by a servant or
officer of the Crown can bind it. In The Minister of National
Revenue v. Inland Industries Limited,[9] the Supreme Court of Canada
considered certain sections of the Income Tax Act
respecting the deductibility of past-service contributions to a
pension plan initially accepted by the Department of National
Revenue for registration but with respect of which deductions
were later refused. Pigeon J. speaking for the Court effectively
disposed of any question of an estoppel by stating:
... However, it seems clear to me that the Minister
cannot be bound by an approval given when the conditions
prescribed by law were not met.
This principle was applied in Stickel v. M.N.R.[10] by Cattanach J.
who stated:
In short, estoppel is subject to the one general rule that it
cannot override the law of the land.
[14] The rationale for the principle expressed in these cases
was succinctly summarized by Bowman J. in Goldstein v. The
Queen:[11]
It is sometimes said that estoppel does not lie against the
Crown. The statement is not accurate and seems to stem from a
misapplication of the term estoppel. The principle of estoppel
binds the Crown, as do other principles of law. Estoppel in
pais, as it applies to the Crown, involves representations of
fact made by officials of the Crown and relied and acted on by
the subject to his or her detriment. The doctrine has no
application where a particular interpretation of a statute has
been communicated to a subject by an official of the government,
relied upon by that subject to his or her detriment and then
withdrawn or changed by the government. In such a case a taxpayer
sometimes seeks to invoke the doctrine of estoppel. It is
inappropriate to do so not because such representations give rise
to an estoppel that does not bind the Crown, but rather, because
no estoppel can arise where such representations are not in
accordance with the law. Although estoppel is now a principle of
substantive law it had its origins in the law of evidence and as
such relates to representations of fact. It has no role to play
where questions of interpretation of the law are involved,
because estoppels cannot override the law.
[15] The question before me is whether the representations
made by officials of Revenue Canada to various strata unit owners
with respect to the taxability of the supply of their units were
representations of fact or law. These representations were in
essence that the acquisition of the strata units was considered
to be a sale and purchase and did not constitute an exempt supply
and as such was properly subject to the 7% GST. In my view, these
representations were not statements of fact but rather were an
opinion as to the appropriate interpretation of the relevant
statutory provisions of the Act. In such circumstances, it
is not open to the Appellants to set up estoppel to preclude the
Minister from relying on the provisions of subsection 261(3) of
the Act to deny their claim for a rebate.
The Limitation Period Argument
[16] I have concluded that the Appellants' "creative
approach" to the interpretation of subsections 261(1) and
(3) of the Act must be rejected. The intention of
Parliament to limit the time period for the filing of a rebate
application has been set out in clear and unambiguous language.
What counsel for the Appellants seeks is to have the Court
interpret this particular provision to make it say what they
believed would have been said by the legislators if this
particular situation had been before them. When the meaning is
clear, this Court has no jurisdiction to mitigate a harsh
consequence. While this Court may be entitled to construe the
language of an Act of Parliament, it may not distort it to
make it accord with what the Court may think to be reasonable.[12]
[17] I am also of the view that the decision in Hansen
is distinguishable both in fact and in law. The issue in that
case was whether she was barred from pursuing a claim for
compensation for land taken for highway purposes by reason of a
one-year limitation in section 25 of the Expropriation Ac[13]t. The
Expropriation Compensation Board (the Board) held that the
Ministry was estopped from relying on the limitation period. The
appeal was from that determination. The facts in Hansen
are that at a meeting between solicitors in June 1995 the
Ministry's negotiator led Hansen's solicitor to believe
that the one-year limitation period would run from August 8, the
possession date, rather than from July 21, being one year from
the date of payment as stipulated in the relevant provision.
MacKenzie J.A. found that "the representation was
unambiguous. It was a representation of fact. It was intended to
be relied upon, and was relied upon" and held that the Board
was correct in its conclusion that the elements of promissory
estoppel were made out. This decision is of little assistance to
the Appellants since the estoppel as found involved a
representation of fact which was acted on by Hansen to her
detriment. That is not the case in the present appeal where the
representations by Gravelle (and other Revenue Canada officials)
were reflective of the Department's interpretation of the
relevant statutory provisions of the Act.
[18] Counsel for the Appellants, relying specifically on the
following comment of MacKenzie J.A. in Hansen:
Section 25, as well as barring proceedings after the
expiration of one year, deems the owner to have accepted advanced
payment in full settlement, in the absence of a further claim
within time. In my view, that does not extinguish the claim but
simply deems the claim paid. The distinction may be a subtle one,
but I think that the wording of section 25 lays down a limitation
that is procedural in nature which can be extended by agreement
or estoppel.
also argued that the limitation in subsection 261(3) of the
Act is procedural in nature and can be extended by
agreement or estoppel. I am unable to agree. First the Appellants
have not made out a case for estoppel. Second, the limitation
period set out in subsection 261(3) of the Act is
substantive in nature and not merely procedural and cannot be
extended. It provides that "a rebate ... shall not be
paid ... unless the person files an application for the
rebate within two years ... ". As counsel for the
Respondent observed, this provision clearly extinguishes all
rights to the rebate. Furthermore, there is no suggestion the
Appellants were incorrectly informed by any Revenue Canada
official of the limitation period for filing a rebate
application. Thus it is difficult to find any basis for the
submission made by Mr. Harkness that Revenue Canada
"effectively agreed to extend the limitation until after the
Court decision" in Taylor and Redmond. Furthermore,
even if the Appellants had been able to establish that Revenue
Canada entered into some form of agreement with them, it would in
effect be an agreement to assess tax otherwise than in accordance
with the law and would be an illegal agreement.[14]
[19] To the foregoing, I must add that there is no provision
in the Act granting authority to the Minister or providing
the Federal Court or this Court with jurisdiction to waive,
extend or alter the statutory time periods specified in a
subsection such as 261(3).[15]
[20] Several other grounds of appeal were pleaded including
unjust enrichment and negligence by and on the part of the
Minister and, relying on the provisions of the Limitation
Act of British Columbia, asserting that their claim was not
statute-barred. Counsel for the Appellants advised that these
grounds were not being pursued.
[21] Accordingly, for the above reasons, the appeal is
dismissed.
Signed at Ottawa, Canada, this 22nd day of August, 2000.
"A.A. Sarchuk"
J.T.C.C.
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