REASONS
FOR JUDGMENT
C. Miller J.
[1]
The Respondent denied Ms. Sharp the New Housing
Rebate of $24,000 on the purchase of a new home in Milton, Ontario in 2011. The
Respondent did so on the basis that the conditions in section 254(2) of the Excise
Tax Act (the “Act”), that would
have entitled Ms. Sharp to the rebate were not met. Specifically, the
Respondent found that because an unrelated business colleague of Ms. Sharp’s,
Mr. Da Silva, signed an Agreement of Purchase and Sale with no intention of
moving into the house and in fact never did become an owner, the rebate is not
available to Ms. Sharp. Ms. Sharp contends that the home was always intended to
be for her parents and Mr. Da Silva only signed the Agreement of Purchase and Sale in case Ms. Sharp’s parents opted not to buy the house and she would then have needed
his financial help.
[2]
A brief explanation of the facts will clarify
this unusual situation. In 2010, Ms. Sharp was a single mother living in Milton, Ontario. Her parents from Mississauga would commute regularly to Milton to help
care for the children. A new development was to be constructed just a block
away from Ms. Sharp’s home. The lots were enthusiastically sought after. Due to
one potential buyer backing out, Ms. Sharp, a real estate broker herself,
quickly stepped in to make an offer on May 20, 2010 (for closing in the summer
of 2011) on a lot just a block away from her own home. She intended this to be
her parents’ home. Upon announcing this transaction to her mother in May 2010,
her mother balked at the idea. Ms. Sharp testified that her mother’s reaction
was not a complete surprise but she had every expectation that her parents
would come around.
[3]
To hedge her bets (my words not hers), Ms. Sharp
spoke to a friend and business colleague, Mr. Da Silva, who agreed to go 50/50
with her on the new home, in the event the parents opted not to buy the house
jointly with Ms. Sharp. On May 21, 2010, the day after Ms. Sharp signed the
Agreement of Purchase and Sale, she and Mr. Da Silva signed an amendment,
adding Mr. Da Silva as a purchaser. The builder, Mattamy Homes (“Mattamy”), signed the Agreement of Purchase and Sale on May 25, 2010.
[4]
Mr. Da Silva testified that he too believed Ms.
Sharp’s parents would come around, but he felt he could not lose in the then
market if it came to pass that he bought the property on a 50/50 basis with Ms.
Sharp. It was clear he was helping a friend in case she got in financial
trouble, but also clear that it would be an investment for him if Ms. Sharp’s parents
did not proceed. He believed his best security was to sign on as a purchaser.
[5]
Ms. Sharp made all the deposit payments and
negotiated any upgrades.
[6]
By January 2011, Ms. Sharp’s parents saw the
light and agreed they would buy the house with Ms. Sharp. Mr. Da Silva was
prepared to step out of the picture at that point. Ms. Sharp contacted Mattamy
to have Mr. Da Silva taken off the Agreement of Purchase and Sale as a
purchaser and have her parents added. Mattamy was prepared to add the parents,
but not prepared to remove Mr. Da Silva. Ms. Sharp tried several times to
persuade Mattamy to remove Mr. Da Silva as a purchaser under the Agreement
of Purchase and Sale. It was against their policy to do so. According to
Mr. Culbert, the Mattamy representative who testified, Mattamy felt more
secure financially with more purchasers on the hook, and only if there was a
valid reason such as a bank refusing financing if a certain individual remained
a purchaser, would Mattamy consider removing a purchaser from the Agreement of
Purchase and Sale. Interestingly, Mr. Culbert explained this to Ms. Sharp in a
letter of January 26, 2013:
Upon reviewing the
correspondence from Canada Revenue Agency that you provided to us, it is now
clear that you are not eligible for the HST rebate as Mr. Da Silva is not a
relation of your parents. Regrettably, this fact was either not considered or
not brought to Mattamy’s attention as an impediment to you receiving the rebate
at time of closing. In hindsight, knowing what we know now, Mattamy would in
all likelihood have allowed Mr. Da Silva’s name to be removed from the purchase
agreement, thus allowing you to be eligible for the rebate.
[7]
Mr. Culbert acknowledged that Mattamy knew Mr.
Da Silva would not own the property.
[8]
When the property was ready for possession, in
late summer 2011, Ms. Sharp, Mr. Da Silva and Ms. Sharp’s parents all
signed a direction re title authorizing Mattamy and their lawyers to transfer
title to Ms. Sharp and her parents. The parents took possession August 21, 2011
and title was transferred to them and Ms. Sharp. The parents remain in the
premises.
[9]
Ms. Sharp signed the rebate application that had
been filled in by Mattamy showing herself, Mr. Da Silva and Ms. Sharp’s parents
as owners. The rebate application was rejected by the Canada Revenue Agency (“CRA”) by letter of August 15, 2012 citing:
We have completed
our review of the GST/HST New Housing Rebate filed on your behalf for 353 Peregrine Way, Milton, Ontario by Mattamy Homes. In order to qualify for the GST/HST New
Housing Rebate, section 254 of the Excise Tax Act requires the property
must be used as a primary place of residence for all of the purchasers or
qualifying relations. Since José Da Silva did not intend to make this property
his primary place of residence you are not eligible for the rebate.
[10]
Is Ms. Sharp entitled to the New Housing Rebate?
[11]
I will first produce the relevant legislation.
Section 254(2) of the Act sets out the requirements for the rebate. It
reads:
254(2) Where
(a) a builder of a single unit residential complex or a
residential condominium unit makes a taxable supply by way of sale of the
complex or unit to a particular individual,
(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
place of residence of the particular individual or a relation of the particular
individual,
(c) the total (in this subsection referred to as the “total
consideration”) of all amounts, each of which is the consideration payable for
the supply to the particular individual of the complex or unit or for any other
taxable supply to the particular individual of an interest in the complex or unit,
is less than $450,000,
(d) the particular individual has paid all of the tax under
Division II payable in respect of the supply of the complex or unit and in
respect of any other supply to the individual of an interest in the complex or
unit (the total of which tax under subsection 165(1) is referred to in this
subsection as the “total tax paid by the particular individual”),
(e) ownership of the complex or unit is transferred to the
particular individual after the construction or substantial renovation thereof
is substantially completed,
(f) 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 of the
complex or unit
(i) in the case of a single unit residential complex, the
complex was not occupied by any individual as a place of residence or lodging,
and
(ii) in the case of a residential condominium unit, the unit
was not occupied by an individual as a place of residence or lodging unless,
throughout the time the complex or unit was so occupied, it was occupied as a
place of residence by an individual, or a relation of an individual, who was at
the time of that occupancy a purchaser of the unit under an agreement of
purchase and sale of the unit, and
(g) either
(i) the first individual to occupy the complex or unit as a
place of residence at any time after substantial completion of the construction
or renovation is
(A) in the case of a single unit residential complex, the
particular individual or a relation of the particular individual, and
(B) in the case of a residential condominium unit, an
individual, or a relation of an individual, who was at that time a purchaser of
the unit under an agreement of purchase and sale of the unit, or
(ii) the particular individual makes an exempt supply by way
of sale of the complex or unit and ownership thereof is transferred to the
recipient of the supply before the complex or unit is occupied by any
individual as a place of residence or lodging,
the
Minister shall, subject to subsection (3), pay a rebate to the particular
individual …
[12]
It is also useful to produce section 262(3) of
the Act. It reads:
262(3) If
(a) a supply of a residential complex or a share of the
capital stock of a cooperative housing corporation is made to two or more
individuals, or
(b) two or more individuals construct or substantially
renovate, or engage another person to construct or substantially renovate, a
residential complex,
the references in
sections 254 to 256 to a particular individual shall be read as references to
all of those individuals as a group, but only one of those individuals may
apply for the rebate under section 254, 254.1, 255 or 256, as the case may be,
in respect of the complex or share.
[13]
Finally, section 133 of the Act
stipulates:
133. For the purposes of this Part, where an agreement is
entered into to provide property or a service,
(a) the entering into of the agreement shall be deemed to be
a supply of the property or service made at the time the agreement is entered
into; and
(b) the provision, if any, of property or a service under the agreement shall be deemed to be part of the supply referred to in paragraph
(a) and not a separate supply.
[14]
Taken together, this legislation provides that to
qualify for the rebate all members of a group (the “particular
individual” referred to in section 254(2)(b) of the Act)
who assumed liability under an Agreement of Purchase and Sale did so on the
basis the property would be used as a primary place of residence for the “particular individual” or
a relation, and such a person first occupied the property. The question boils down
to whether in these circumstances Mr. Da Silva was part of the group
that constituted the “particular individual”. If
so, the conditions for a rebate have not been met.
[15]
The Appellant argues that Mr. Da Silva was not
part of the group comprising the “particular individual”
because he was not a buyer under the Agreement of Purchase and Sale but simply an agent or a bare trustee. Mr. Yasny, Appellant’s counsel, lists the
following facts as supporting that proposition:
a)
Mr. Da Silva did not intend to take title.
b)
He did not expect to have an interest in the new
home.
c)
He paid no part of the down payment.
d)
He did not sign the amendment for the upgrades,
though it increased the purchase price by $41,000 and the builder accepted this
change as validly signed by all purchasers.
e)
He abandoned his role on the Agreement of
Purchase and Sale as soon as the parents agreed to go forward with the purchase
and he assigned his interest to the Appellant and her parents, at their
request, as soon as the builder afforded the chance, through the direction re
title.
f)
When he signed the direction re title, directing
title solely to the Appellant and her parents, he was not paid a share of the
accrued gain.
[16]
The Appellant argues this proves Ms. Sharp
retained the right to control and direct Mr. Da Silva in all matters relating
to the property – a criteria for bare trustee found in GST/HST Technical Interpretation
Bulletin B-068. I disagree.
[17]
I do not find these facts support a finding that
Mr. Da Silva was not the “particular individual”.
At the time he signed the Agreement of Purchase and Sale, Ms. Sharp’s parents
had made it clear they were not going to buy the property. He and Ms. Sharp had
a 50/50 deal. Mr. Da Silva had obliged himself to Mattamy. Notwithstanding he and
Ms. Sharp had an expectation (borne out as it turned out) that the parents
would ultimately step in and he would step out, he personally was on the hook
to Mattamy. Ms. Sharp had no control or direction over Mr. Da Silva in that
regard. An informal understanding between Mr. Da Silva and Ms. Sharp
did not create a trust or agency relationship.
[18]
Mr. Yasny went on to suggest that Mr. Da
Silva was not the “particular individual” because
his interest was subject to the parents’ refusal to close. However, at the time
he signed the Agreement of Purchase and Sale there was no “subject to” as the parents had not agreed to be part of
the deal. At that stage, it was an agreement for Ms. Sharp and Mr. Da Silva to
buy an investment property. The parents’ refusal was not, as portrayed by Mr.
Yasny, a condition precedent to Mr. Da Silva’s interest. Upon signing the
Agreement of Purchase and Sale, Mr. Da Silva had the same right as Ms. Sharp as
a purchaser of the property, notwithstanding he had provided no deposit or been
involved in determining upgrades.
[19]
Mr. Yasny suggests there are two contracts at
play: the one between Mattamy and Mr. Da Silva and one between Ms. Sharp and
Mr. Da Silva. There is certainly no condition precedent in the first contract.
And, I am not convinced there is even in the latter. It was the reverse of a
condition precedent. By signing the Agreement of Purchase and Sale together, Ms.
Sharp and Mr. Da Silva effectively agreed they were buyers unless and until Ms.
Sharp’s parents stepped in to replace Mr. Da Silva on the Agreement of Purchase
and Sale. Presumably that would bring their agreement to an end. I fail to see
how that is a condition precedent as described by Justice Lamarre in Lepage
v The Queen:
A contract subject
to a condition precedent does not become enforceable unless the condition has
been satisfied or the parties have waived it.
This is simply not the situation before me.
[20]
Was Mr. Da Silva’s status as a purchaser somehow
altered by the amendment to the Agreement of Purchase and Sale in 2011 adding
the parents as purchasers? As far as Ms. Sharp and Mr. Da Silva were concerned
this ended his interest in the property. Unfortunately, Mattamy did not see it
that way, even though Mattamy recognized that Mr. Da Silva would not become an owner
and wanted to be removed from the Agreement of Purchase and Sale. The Appellant
argues that at that stage Mr. Da Silva simply became a guarantor of payment.
[21]
To reach that result, I would have to find the
agreement between Mr. Da Silva and Mattamy had been amended. But it
had not. Mattamy did not look to Mr. Da Silva as a guarantor; Mattamy
specifically kept him on the Agreement of Purchase and Sale as a purchaser.
There was no amendment.
[22]
Finally, Mr. Yasny relies on section 134 of the Act
which reads:
For the purposes of
this Part, where, under an agreement entered into in respect of a debt or
obligation, a person transfers property or an interest in property for the
purpose of securing payment of the debt or performance of the obligation, the
transfer shall be deemed not to be a supply, and where, on payment of the debt
or performance of the obligation or the forgiveness of the debt or obligation,
the property or interest is retransferred, the retransfer of the property or
interest shall be deemed not to be a supply.
This does not
apply: there has been no transfer of an interest in property to secure payment.
[23]
I was also referred to the cases of Davidson
v The Queen
and Goyer v The Queen,
cases I had distinguished in my reasons in Rochefort v The Queen. I find that they do no help
Ms. Sharp in this case, but confirm a finding that someone entering a purchase
agreement is a “particular individual” for
purposes of section 254(2) of the Act and subject to the requirements in
that provision.
[24]
This brings me to Rochefort and my
comments therein that:
From a policy
perspective, the Rocheforts are clearly who the rebate is meant to benefit, as
they are the buyers of the property, the ones liable for the GST and they took
possession of the property after substantial completion to reside in it as
their primary residence.
[25]
Ms. Yasny suggests that Ms. Sharp and her
parents should be considered in the same light, as being home buyers for whom
the rebate is intended. They fall within the spirit of the legislation. I do
not disagree with that sentiment. However, unlike Rochefort, where I
could find a justifiable legal position bringing the Rocheforts within the
spirit and wording of the legislation, I cannot find a way to accomplish the
latter for Ms. Sharp, despite able and innovative arguments by her counsel. On
the facts as I find them, I am unable to conclude there is a trust, agency or
financing arrangement that would somehow remove Mr. Da Silva as a “particular individual” for purposes of the rebate. This
is unfortunate given the intentions of the Parties. I must, however, dismiss
the Appeal.
Signed at Ottawa, Canada, this 31st day of October 2014.
“Campbell J. Miller”
Email this Content