REASONS
FOR JUDGMENT
Smith J.
[1]
The appellant has appealed a notice of
assessment from the respondent, through the Minister of Revenue of Quebec (the Minister),
dated March 18, 2013, denying her application for a GST/QST rebate
following the purchase of a new condominium (the complex), on which the
appellant had paid the GST/QST in accordance with the Excise Tax Act (the
ETA).
Summary
[2]
Subsection 254(2) of the ETA provides that the purchaser
of a new residential property may apply for a partial rebate of the GST paid on
the purchase price if he or she satisfies the conditions set out in
paragraphs 254(2)(a) to (g). In this case, the Minister denied the rebate
primarily on the grounds that the appellant had not acquired the complex for
use as her primary residence and that neither she nor any of her relations had
ever occupied it. The appellant, on the other hand, claims that she had the requisite
intention at the time the builder accepted her promise to purchase and that she
occupied the complex for approximately five months while waiting for the
transfer of title, but that she had decided to rent out the complex to third
parties after reconciling with her husband.
Issues
[3]
There are three issues to decide in connection
with this dispute:
1.
The first issue involves the expression “aux
termes du contrat de vente” in the French version of paragraph 254(2)(b)
of the ETA. The Minister submits that the “contrat de vente” was signed
at the time of closing, and that given the wording of the provision, it is from
that moment that the Court must consider the issue of intention. This is above
all a question of statutory interpretation.
2.
The second issue is whether the appellant had
the requisite intention under paragraph 254(2)(b) of the ETA. This involves
a review of all the evidence to determine whether, at the time she undertook to
purchase the complex, the appellant intended to acquire it for use as her
primary residence. The Minister assumed that she did not have the requisite
intention.
3.
The third issue is closely related to the
second, namely, whether the appellant in fact occupied the complex within the
meaning of paragraph 254(2)(g). The appellant submits that she took
possession of the complex once the work had been substantially completed. The
Minister, on the other hand, assumed that the appellant had never occupied the
complex.
[4]
Issues 2 and 3 above are questions of fact, and
it is understood that the appellant must convince this Court of the contrary on
a balance of probabilities.
Facts
[5]
The appellant is a resident of the city of
Laval, Quebec. She submits that she was in the process of separating from her
spouse and that she had purchased the complex at issue in the Laurentians for
the purpose of moving there with her three children and escaping her family
environment. She intended to remain there permanently. According to her
testimony, she signed a promise to purchase with the builder on or about
March 13, 2011, moved in following the completion of the work in
June 2011 and lived there until December.
[6]
Her spouse, who had declared bankruptcy in 2010
and was unemployed, found a new job in October 2011; the couple then reconciled,
and she decided to return to live with him in the family home in Laval. The
complex was rented out to third parties in December 2011.
[7]
According to the appellant, even though she had
returned to the family home, she decided to keep the complex because she was
still considering the possibility of returning there. She then explained that
her spouse was diagnosed with cancer in spring 2012, and she decided to remain
in the family home permanently, which is not relevant to this dispute.
[8]
The appellant indicated that she had no proof of
a change of address because the property taxes, monthly fees and services
(water and hydro) were at the builders’ expense until the closing. She had not
signed up for cable or a land line because she had a cell phone. Also, because
she returned to the family home in Laval, that was the address that appeared on
her income tax return. She filed documents that were not relevant to this
dispute.
[9]
Upon cross-examination, the appellant admitted
that she had not moved all of her furniture and personal effects, that her
three children had never lived in the complex and that they had not changed
schools. She mainly lived there on weekends, generally by herself.
[10]
The spouse’s testimony did not add much
evidence, although he did confirm, among other things, the financial and
marital difficulties, the couple’s reconciliation and the efforts to find
tenants starting around mid-October 2011. I note, however, that he contradicted
himself by stating that the search for tenants began in December.
[11]
He also presented, as evidence of the
appellant’s intention to occupy the premises, a copy of an application for a
certificate of authorization that he himself had filled out and filed with the
Municipality of Sainte-Agathe on September 8, 2011, to allow the
appellant, as owner, to provide accounting services from the complex. Given the
change in circumstances, there was no follow-up on this application, and it was
cancelled in December 2011. I find that this document has very little probative
value.
[12]
To complete this summary of the facts, I would
add that the appellant acknowledged upon cross-examination that she owned
another condominium located in Saint-Jean-sur-Richelieu and that this was also
a rental property. Although she declared a loss in her 2011 income tax return of
approximately $3,009, she did not seem to be well informed on this subject. Her
spouse’s testimony regarding the circumstances surrounding the acquisition of
this property seemed both mysterious and suspicious, particularly given the
family’s financial difficulties and his 2010 bankruptcy. In short, I draw from
this a negative inference with respect to their credibility.
The “contrat
de vente” – the applicable law
[13]
As indicated above, subsection 254(2) of the ETA
provides that the purchaser of a new residential property may apply for a
partial rebate of the GST paid on the purchase price. Among the conditions for
the rebate, paragraph 254(2)(b) sets out the following:
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(b) - At the time the particular individual
becomes liable or assumes liability under an agreement of purchase and
sale of the complex or unit entered into between the builder and the
particular individual, the particular individual is acquiring the complex
or unit for use as the primary residence of the particular individual or
a relation of the particular individual.
[My emphasis.]
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(b) - au moment où le particulier devient
responsable ou assume une responsabilité aux termes du contrat de vente
de l’immeuble ou du logement conclu entre le constructeur et le particulier, celui-ci
acquiert l’immeuble ou le logement pour qu’il lui serve de lieu de résidence
habituelle ou serve ainsi à son proche;
(Mon
soulignement.)
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[14]
The Minister submits that the Court must analyze
the appellant’s intention from the moment she acquired the title “aux termes
du contrat de vente”, i.e. at the time of closing. The Minister cites article
1708 of the Civil Code of Québec (the CCQ), which defines “sale”
under the civil law:
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1708. Sale is a contract by which a person, the seller, transfers
ownership of property to another person, the buyer, for a price in money
which the latter obligates himself to pay.
A dismemberment
of the right of ownership, or any other right held by a person, may also be
transferred by sale.
1991, c. 64, a.
1708
|
1708. La vente est le contrat par lequel
une personne, le vendeur, transfère la propriété d'un bien à une autre
personne, l'acheteur, moyennant un prix en argent que cette dernière s'oblige
à payer.
Le transfert
peut aussi porter sur un démembrement du droit de propriété ou sur tout autre
droit dont on est titulaire.
1991, c. 64, a.
1708
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[15]
I must note from the outset that I am far from
convinced by this interpretation, given the use of the expression “under an
agreement of purchase and sale” in the English version of paragraph 254(2)(b),
which instead suggests a promise to purchase undertaken before the purchaser
acquires title in the property.
[16]
I also note that paragraph 254(2)(f) of the
ETA provides for the possibility of occupying the premises “after the
construction or substantial renovation is substantially completed and before
possession of the complex or unit is given to the particular individual under
the agreement of purchase and sale”. The expression “under the agreement of
purchase and sale” in that paragraph must logically refer to a document
delivered after the completion of the work, i.e. at the time of closing of the
transaction.
[17]
As indicated above, the Minister cites
article 1708 of the CCQ in support of his interpretation of the expression
“aux termes du contrat de vente” and the moment at which the appellant’s
intention must be analyzed. However, because this provision relates to the purchase
of a new residential property, it is also important to consider article 1785
CCQ, which reads as follows:
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1785. The sale of an existing or
planned residential immovable by the builder or a developer to
a natural person who acquires it to occupy it shall be preceded by a
preliminary contract by which a person promises to buy the immovable,
whether or not the sale includes the transfer to him of the seller's rights
over the land.
[My emphasis.]
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1785. Dès lors que la vente
d'un immeuble à usage d'habitation, bâti ou à bâtir, est faite par le
constructeur de l'immeuble ou par un promoteur à une personne physique
qui l'acquiert pour l'occuper elle-même, elle doit, que cette
vente comporte ou non le transfert à l'acquéreur des droits du vendeur sur le
sol, être précédée d'un contrat préliminaire par lequel une personne
promet d'acheter l'immeuble.
(Mon emphase.)
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[18]
To meet the requirements of this provision,
there must be a “preliminary contract” by which the purchaser promises to buy
the residential immovable in a transaction that must ultimately conclude with a
notarized deed of sale.
[19]
The Minister brought to my attention the
decision in Virani v. The Queen, 2010 TCC 113, but I do not believe
that it supports her position on this point. That decision also involved a
condominium in British Columbia that was still under construction. The
appellant signed a promise to purchase in November 2002 but did not acquire title
in the property until February 2005. The Minister submitted that the promise to
purchase was a “pre-construction agreement” and not an “agreement of purchase
and sale” and that the relevant date for determining intention was the closing
date in 2005. Justice Campbell disagreed with this interpretation, stating the
following at paragraph 12:
12. The
wording in this provision is crystal clear. It specifically refers in both
paragraph 254(2)(b) and in clause 254(2)(g)(i)(B) to “an agreement of purchase
and sale”. Liability explicitly attaches to the particular individual who
executes an agreement of purchase and sale. There is no ambiguity here and I
am simply rejecting Respondent counsel’s submissions that liability arises for
the Appellant when he took legal title and assumed responsibility for the
mortgage payments in February 2005. That reasoning completely ignores the
wording of subsection 254(2).
[My
emphasis.]
[20]
It is important to note that in the original
English decision, Justice Campbell uses the term “agreement of purchase and
sale”, which was translated as “contrat de vente” in the French version.
Justice Campbell went on to state at para. 14:
14. Respondent
counsel argued that the Appellant assumed no liability until February
2005 because in November 2002 he did not have legal title. She characterized
the November 2002 document as a pre-construction agreement. That may be
exactly what it is but, nonetheless, the contract was clearly an agreement of
purchase and sale as referenced and contemplated in this provision. In
fact, Exhibit A-3 titles it “contract of purchase and sale”. This document
solidly committed the Appellant to, and made him liable for, the purchase of
the Seymour Street property. The deposits totalled over $31,000.00. Therefore,
I believe that the intention of the Appellant to acquire and occupy the Seymour
Street unit as his primary residence must be determined in November
2002 when he executed the agreement of purchase and sale and not in
February 2005 when the actual transfer of legal title and possession
occurred.
[My emphasis.]
[21]
The Minister also brought to my attention the
decision in Wong v. The Queen, 2013 TCC 23, originally written in
English. At paragraph 5 of the French translation, Justice Paris wrote
the following:
[5] Dans
le cas présent, il n’est pas contesté que le contrat de vente pour
l’achat de la propriété a été conclu par M. et Mme Wong le
9 décembre 2009, date précédant la construction de l’immeuble où se
trouve la propriété. Par conséquent, c’est l’intention qu’ils avaient à ce
moment-là au sujet de l’utilisation qu’ils feraient de la propriété qui est
déterminante.
[My emphasis.]
[22]
I therefore find that the expression “aux
termes du contrat de vente” in the French version of paragraph 254(2)(b)
of the ETA must be broadly interpreted to include a promise to purchase or, to use
the words of article 1785 CCQ, “a preliminary contract by which a person
promises to buy the immovable”. This interpretation gives a common meaning to
both versions of the provision. In light of this finding, it is evident that
the evidence must be analyzed from the time the promise to purchase was signed.
[23]
Before turning to the second issue, I would add
that the Minister himself filed in evidence a document entitled [translation] “conditional pre-occupancy
agreement” signed by the appellant on September 1, 2011, in which it is
indicated that [translation] “all
of the clauses of the preliminary agreement and pre-contract, without
restriction, take precedence over this conditional pre-occupancy agreement”. I
am of the view that this document clearly and unambiguously establishes the
existence of a preliminary agreement or a promise to purchase within the
meaning of paragraph 254(2)(b) of the ETA.
Intention
under paragraph 254(2)(b) of the ETA – the applicable law
[24]
Regarding the issue of intention, I must
determine whether, at the time she entered into the promise to purchase, the
appellant intended to acquire the complex for use as a primary residence: Mendes
v. R., 2015 TCC 11. In that decision, Justice Woods found that the
evidence was not sufficiently detailed to satisfy her that the appellant had
indeed intended to use the property as a primary residence and that the
evidence was not plausible.
[25]
In Kandiah v. The Queen, 2014
TCC 276, Justice Miller states at paragraph 18 that the onus is on
the appellant to satisfy the Court on a balance of probabilities. He cites the
following passage from Coburn Realty Ltd. v. Canada, 2006 TCC 245,
with respect to intention:
[10] Statements
by a taxpayer of his or her subjective purpose and intent are not necessarily and
in every case the most reliable basis upon which such a question can be
determined. The actual use is frequently the best evidence of the purpose of
the acquisition. . . .
[My emphasis.]
[26]
In that decision, there was little evidence relating
to the occupancy of the premises, and the property was listed for sale shortly
after closing, which led Justice Miller to believe that this was probably the
best indicator of the appellant’s intention at the time he signed the promise
to purchase. Furthermore, he wrote the following at paragraph 21:
[21] Taking a
few belongings (mattresses and towel for example), leaving behind
virtually all of your other belongings and furnishings in the family home, does
not constitute actual use of 50 Minerva Avenue as the primary place of
residence for the family. At best, I would describe Mr. Kandiah’s and his daughter’s
arrangement as camping, not residing – certainly not residing as a primary place of residence.
[My emphasis.]
[27]
Finally, in Goulet v. The Queen, 2010
TCC 95, the property had been purchased by the parents, and, according to
the evidence filed, their son and daughter each lived there for a distinct
four-month period. The Court held that the evidence as a whole did not indicate
that there had been a genuine change of address and that the children’s occupancy
was temporary at best.
Occupancy
of the premises – the applicable law
[28]
For the third issue, paragraph 254(2)(g) of
the ETA provides that the purchaser must be the “the first individual to occupy
the complex . . . as a place of residence at any time after
substantial completion of the construction or renovation”.
[29]
In my view, the considerations identified in Kandiah
and Goulet, supra, also apply to the issue of occupancy of the
premises after substantial completion of construction. It must be more than
passing or sporadic. There must be an element of permanence that supports the
intention to acquire the complex for use as a primary residence. Transitory
occupancy cannot satisfy the requirement that the purchaser be “the first
individual to occupy the complex” within the meaning of paragraph 254(2)(g) of
the ETA.
Analysis and conclusion
[30]
In light of my finding with respect to the first
issue, the appellant must satisfy this Court on a balance of probabilities that
she intended to acquire the complex as a primary residence for herself or a
relation at the time she signed the promise to purchase in spring 2011 and,
second, that she actually occupied the complex after substantial completion of
the construction.
[31]
I should state from the outset that I find the
testimony of the appellant and her spouse far from persuasive, and I have
serious doubts as to their credibility. Not only did the testimony contain inconsistencies,
but the presentation of the evidence was simplistic. It appeared prefabricated
and even deliberately gathered to meet the statutory requirements and support
the application for a rebate under the ETA.
[32]
First, there was no independent witness to
corroborate the appellant’s version of the facts. There was also a near-total
absence of documentary evidence. While the appellant provided explanations for
the lack of bills and lack of evidence of a change of address, this Court was
not given the opportunity to review the application for credit from the bank,
the promise to purchase or the documents exchanged after the completion of the
construction. The sole document relevant to the transaction was presented by
the Minister, and this was the [translation]
“conditional pre-occupancy agreement”. This document contradicts the testimony
of the appellant, who claimed that she had signed a promise to purchase on
March 11, 2011, which was accepted by the builder on March 13, 2011,
and that she had moved in on June 30. The pre-occupancy agreement instead
suggests a promise to purchase dated June 30, 2011. Moreover, because this
agreement was signed on September 1, 2011, it seems evident that the
appellant could not have moved into the complex before early September.
[33]
The appellant indicated that she had not moved
all of her furniture or personal effects into the complex and that she mainly
went there on weekends, generally by herself. Her testimony was vague on this
point and lacking in detail. I can only conclude that her occupancy was
temporary and sporadic at best. There was certainly no element of permanence. Even
if I were to accept that she moved in in early September, which does not seem
very plausible, the couple reconciled in mid-October, and she and her spouse
began seeking tenants at that time. Given the short duration and transitory
nature of the occupancy, I cannot conclude that the appellant was the first
individual to occupy the premises within the meaning of paragraph 254(2)(g).
[34]
Finally, the complex was rented to third parties
shortly after the transaction was closed, and, like Justice Paris in Kandiah,
supra, I am of the view that the actual use of a property is the best
evidence of the purpose of its acquisition.
[35]
I have no choice but to dismiss the appeal.
Signed at Ottawa,
Canada, this 15th day of January 2016.
“Guy R. Smith”
Translation certified true
on this 4th day of
March 2016
Francie Gow, BCL,
LLB
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