Date:
20091005
Docket: A-477-08
Citation:
2009 FCA 285
CORAM: EVANS
J.A.
LAYDEN-STEVENSON
J.A.
TRUDEL
J.A.
BETWEEN:
HER MAJESTY THE QUEEN
Appellant
and
STANTEC INC.
Respondent
REASONS FOR JUDGMENT OF THE
COURT
(Delivered
from the Bench at Edmonton, Alberta, on October 5, 2009)
LAYDEN-STEVENSON
J.A.
[1]
The
Tax Court of Canada allowed an appeal by Stantec Inc. (Stantec). The issue was
Stantec’s eligibility to claim input tax credits (ITCs) for GST paid in
relation to incurred expenses. Campbell Miller J. concluded, under three
separate provisions of the Excise Tax Act, R.S., 1985, c. E-15 (the
Act) that Stantec qualified for ITCs. The Crown appeals.
[2]
Stantec,
a Canadian public corporation, functions as a holding company. It has a network
of subsidiary companies in Canada and the United States employing
approximately 9,000 people. Stantec’s shares have been listed for trading on
the Toronto Stock Exchange for a number of years.
[3]
In
2005, Stantec incurred costs in Canada to obtain a listing of
its shares on the New York Stock Exchange. The listing was a condition
precedent to a merger between one of Stantec’s wholly-owned subsidiaries,
Stantec California, and an
American Company, Keith Companies Inc. (Keith). The condition precedent was
stipulated in section 7.03 of the Agreement and Plan of Merger and
Reorganization (the Acquisition Agreement). Stantec paid GST on the legal,
accounting and consulting services related to the listing on the New York Stock
Exchange and claimed ITCs. The Minister denied the request.
[4]
On
appeal to the Tax Court of Canada, Miller J. concluded that Stantec was
entitled to the ITCs under both subsections 186(1) and 186(2) of the Act. He
further determined that Stantec was entitled to ITCs under section 169 of the
Act, the general provision. Applying a purposive definition to section 169, the
Tax Court judge concluded that Stantec had engaged in commercial activities.
[5]
To
succeed, the appellant must establish that the Tax Court judge erred on each of
the bases upon which he allowed Stantec’s appeal. That is, if Miller J. did not
err in relation to at least one of his determinations, the appeal must fail.
[6]
The
standard of review is that established by Housen v. Nikolaisen, [2002] 2
S.C.R. 235. The standard for questions of law is correctness and for all other
questions is palpable and overriding error.
[7]
Even
if the appellant is correct regarding the Tax Court judge’s findings pursuant
to subsection 186(1) and section 169 of the Act (and we make no such
determination), the appellant has not established either an error of law or a palpable
and overriding error with respect to the judge’s finding of mixed fact and law
under subsection 186(2).
[8]
The
text of subsection 186(2) of the Act is as follows:
|
Excise Tax Act,
R.S.,
1985, c. E-15
186.(2)
For the purposes of this Part, if
(a)
a registrant that is a corporation resident in Canada (in this subsection
referred to as the “purchaser”) acquires, imports or brings into a
participating province a particular property or service relating to the
acquisition or proposed acquisition by it of all or substantially all of the
issued and outstanding shares, having full voting rights under all
circumstances, of the capital stock of another corporation, and
(b)
throughout the period beginning when the performance of the particular
service began or when the purchaser acquired, imported or brought into the
participating province, as the case may be, the particular property and
ending at the later of the times referred to in paragraph (c), all or
substantially all of the property of the other corporation was property that
was acquired or imported for consumption, use or supply exclusively in the
course of commercial activities,
the
particular property or service is deemed to have been acquired, imported or
brought into the participating province for use exclusively in the course of
commercial activities of the purchaser and, for the purpose of claiming an
input tax credit, any tax in respect of the supply of the particular property
or service to the purchaser, or the importation or bringing in of the
particular property by the purchaser, is deemed to have become payable and
been paid by the purchaser on the later of
(c)
the later of the day the purchaser acquired all or substantially all of the
shares and the day the intention to acquire the shares was abandoned, and
(d)
the day the tax became payable or was paid by the purchaser.
|
Loi sur la taxe d’accise,
L.R.,
1985, ch. E-15
186.(2) Pour
l’application de la présente partie, le bien ou le service qu’un inscrit —
personne morale résidant au Canada — (appelé « acheteur » au présent
paragraphe) acquiert, importe, ou transfère dans une province participante
est réputé avoir été acquis, importé, ou transféré dans la province
participante, selon le cas, pour utilisation exclusive dans le cadre de ses
activités commerciales, si les conditions suivantes sont réunies :
a)
le bien ou le service est lié à l’acquisition réelle ou projetée par
l’acheteur de la totalité ou de la presque totalité des actions, émises et en
circulation et comportant plein droit de vote en toutes circonstances, du
capital-actions d’une autre personne morale;
b)
tout au long de la période commençant soit au début de l’exécution du
service, soit au moment où l’acheteur, selon le cas, a acquis ou importé le
bien, ou l’a transféré dans la province participante, et se terminant au
dernier en date des jours visés à l’alinéa c), la totalité ou la presque
totalité des biens de l’autre personne morale sont des biens acquis ou
importés pour consommation, utilisation ou fourniture exclusive dans le cadre
d’activités commerciales.
Aux
fins du crédit de taxe sur les intrants, la taxe relative à la fourniture du
bien ou du service à l’acheteur, ou à l’importation ou au transfert du bien
par lui, est réputée être devenue payable et avoir été payée par lui au
dernier en date des jours suivants :
c)
le jour où l’acheteur a acquis la totalité ou la presque totalité des actions
ou, s’il est postérieur, le jour où il a renoncé à les acquérir;
d)
le jour où la taxe est devenue payable ou a été payée par lui.
|
[9]
There
is no dispute that Miller J. set out the relevant prerequisites for Stantec to
claim ITCs under subsection 186(2). Specifically, Stantec had to demonstrate
that:
(i) Stantec
is a registrant corporation resident in Canada;
(ii) Stantec
must propose to acquire or acquire substantially all of the voting shares of
the target company, Keith Companies;
(iii) Substantially
all of Keith Companies’ property must be used exclusively in commercial activities;
(iv) The
listing services must relate to the acquisition of substantially all of Keith
Companies’ shares.
[10]
The
debate centered on the second and fourth prerequisites. The Crown argued before
the Tax Court and before this Court that there was no acquisition. In the court
below, it relied upon Shell v. Canada, [1999] 3 S.C.R. 622 (Shell)
and Singleton v. Canada, [2001] 2 S.C.R. 1046 (Singleton) to
support its position.
[11]
In
addressing this argument, the Tax Court Judge had regard to the December 1999
Technical Notes where the purpose of the provision is described as follows:
Subsection
186(2) applies in situations where a corporation acquires or proposes to
acquire all or substantially all of the voting shares of the capital stock of
another corporation that engaged exclusively in commercial activities. In this
case, the purchasing corporation is allowed to claim input tax credits for
property and services it acquires in relation to the takeover or proposed
takeover.
He also referred to the
Government Memoranda Series, Chapter 8.1 regarding the term “acquire”. It
reads:
The word
“acquire” is not defined in the Act. The ordinary dictionary definition of the
term “acquire” is to get, obtain, have control over or possess. With respect to
property, relevant case law indicates that property is acquired by obtaining
ownership or such normal aspects of ownership as possession, use or risk.
[12]
After
examining the circumstances, Miller J. found, at paragraph 24 of his reasons,
that Stantec effectively “gets full ownership of Keith Companies. It does so by
contractually having control of the disposition of those shares in the form of
their cancellation. As Stantec already owned all of the shares of one
predecessor company, it is obtaining, by this transaction, 100% of the right to
control the other predecessor, now continued as the newly merged company.” He
further found that Stantec, in contracting for the cancellation of Keith’s
shares and in owning all of the shares of the merged company, has for the
purposes of subsection 186(2) effectively acquired all of Keith’s shares.
[13]
The
Shell and Singleton authorities, in the context of this matter,
stand for the proposition that, in looking to the purpose and substance of a
transaction, the true economic purpose cannot be used to ignore the statutory
language. Here, the Act uses the word “acquisition” but does not define it.
Administrative interpretations are not binding on courts, but are entitled to
consideration and may constitute an important factor in the interpretation of
statutes: Silicon Graphics Limited v. Canada, [2003] 1 F.C. 447
(F.C.A.). Jurisprudential interpretations are regularly utilized.
[14]
The
Tax Court judge examined all of the circumstances surrounding the transaction
having regard to the purpose of the subsection in the context of the provisions
as a whole. His determination, at its highest, constitutes a question of mixed
fact and law. No palpable and overriding error has been demonstrated with
respect to his conclusion that “Stantec has acquired Keith Companies, on any
interpretation of the word ‘acquired’.”
[15]
The
fourth prerequisite is satisfied if the listing services (those obtained by
Stantec to list and trade its own shares on the New York Stock Exchange) are
related to the acquisition. The appellant claims, at the relevant time, the
services were not in relation to Keith’s or Stantec’s subsidiary’s shares.
[16]
The
Tax Court judge had regard to Slattery (Trustee of) v. Slattery, [1993]
3 S.C.R. 430 where the Supreme Court of Canada interpreted
the phrase “in relation to”. Applying the Supreme Court’s construction, he
reasoned that the nexus between acquiring the listing services and the shares
of either Keith or Stantec California need not be one of
prominence, let alone exclusivity. He concluded that the listing services were
acquired so that Stantec could complete its deal to own all the shares of the
company resulting from the merger of Keith and Stantec California. This was a
context-driven inquiry.
[17]
Miller
J. found, as a fact, that the services “can readily and reasonably be regarded
as being in relation to the shares of either Keith Companies or Stantec California or the
shares of the merged company, that is, the investment by Stantec in its new
acquisition.” We can detect no palpable and overriding error in this factual conclusion.
[18]
The
appeal will be dismissed with costs.
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