Date:
20100113
Docket: A-159-09
Citation: 2010 FCA 9
CORAM: LÉTOURNEAU
J.A.
NOËL
J.A.
TRUDEL
J.A.
BETWEEN:
HER MAJESTY
THE QUEEN
Appellant
and
COSTCO
WHOLESALE CANADA LTD.
Respondent
REASONS FOR
JUDGMENT
NOËL J.A.
[1]
This
is an appeal from a decision of Justice Campbell J. Miller of the Tax Court of
Canada (the Tax Court Judge) allowing the appeal by Costco Wholesale Canada
Ltd. (the respondent or Costco) from three concurrent reassessments dated
December 15, 2006 made pursuant to Part IX of the Excise Tax Act, R.S.C.
1985, c. E-15 (the Act) and thereby vacating the reassessments.
[2]
At
issue is whether Costco ought to have collected GST on a quarterly payment made
by American Express (Amex) to Costco pursuant to one of two related agreements
(the Co-Branded Agreement). According to the Minister of National Revenue (the
Minister), this payment was consideration for a taxable supply by Costco to
Amex and therefore subject to GST.
[3]
The
Tax Court Judge held that the quarterly payment, which he identified as being
made pursuant to paragraph 3.01(a) of the Co-Branded Agreement (Reasons,
para. 15), was not for the supply of anything by Costco to Amex but was simply
a rebate of part of the gross fee payable by Costco to Amex. In so holding, the
Tax Court Judge found that the right of exclusivity provided by Costco,
although “certainly significant” and “critical to the overall deal between
Costco and Amex”, was not a taxable supply by Costco to Amex, but merely a
bargaining tool akin to a discounted price based on volume (Reasons, paras. 27
and 30(i)).
[4]
The
appellant contends that in reaching this conclusion, the Tax Court Judge failed
to consider the extended definition of the word “property” in subsection 123(1)
of the Act, which includes “a right or interest of any kind”. According to the
appellant the right of exclusivity, which the Tax Court Judge found to be
critical to the overall arrangement, clearly comes within the ambit of this
definition. The appellant submits that this is particularly so when regard is
had to numerous judicial pronouncements on the scope and extent of this
provision (reference is made to Vanex Truck Services Ltd. v. Canada,
2001 FCA 159, at paras. 12 to 14; RCI Environment Inc. v. Canada; 2008
FCA 419, at para. 39, and the cases referred to therein).
[5]
The
definition of “property” was not referred to in the pleadings of the Crown, but
it was clearly brought to the attention of the Tax Court Judge during the
course of argument (Transcript, Amended Appeal Book, p. 241). Nevertheless, it appears
that the Tax Court Judge did not have this definition in mind when he rendered
his judgment since no reference is made to it in what is otherwise a complete
and well reasoned decision.
[6]
Given
the findings made by the Tax Court Judge in the course of his reasons, the
extended definition of “property” was relevant to the issue which he had to
decide and had to be considered. In particular, in order to justify the
conclusion that he reached, it was incumbent upon the Tax Court Judge to
explain why, when regard is had to this definition, the payment made pursuant
to paragraph 3.01(a) of the Co-Branded Agreement was not consideration
for a supply of property.
[7]
The
respondent objects to this argument being raised on appeal. It does not contend
that reliance on the definition of “property” is statute barred, or that the Act
otherwise prevents the Court from considering this provision. Rather, the
respondent suggests that the argument was not made before the Tax Court Judge
(memorandum of the respondent, para. 25), and submits that the purpose of an
appeal is to correct trial errors and not to re-argue the case on novel grounds
(Kaiman v. Graham, 75 R.P.R. (4th) 157 (Ont. C.A.); 2009 ONCA
77 (C.A.) at para. 20 (Kaiman) citing Canadiana Towers Ltd. v.
Fawcett, (1978), 21 O.R. (2d) 545 (C.A.) at p. 548).
[8]
However,
as noted, the defined meaning of “property” was brought to the attention of the
Tax Court Judge and he appears to have made a number of findings that are
relevant to its application (Reasons, paras. 27 in fine, 30(i) and 32, 2nd
sentence). In these circumstances, it would be inappropriate to allow this
matter to be decided without consideration being given to this definition.
[9]
The
respondent nevertheless submits that it would be unsafe for this Court to
tamper with the conclusions of the Tax Court Judge in the absence of a full
evidentiary record (Shaver Hospital for Chest Diseases v. Slesar, (1979)
27 O.R. (2d) 383 at para. 20 citing The Owners of the Tasmania v. Smith,
(1890) 15 App. Cas. 223 (H.L.); Braber Equipment Ltd. v. Fraser Surrey Docks
Ltd. [1999] B.C.J. No. 2360, 1999 BCCA 579 at
paras. 6 and 7; Kaiman, supra, at paras. 18 to 21). It contends that the
definition of “property”, if applicable on the facts of this case, gives rise
to allocation issues which have yet to be considered and that the record is
incomplete on this point.
[10]
In
the circumstances, I believe that the appropriate remedy would be to allow the
appeal, set aside the decision of the Tax Court Judge and remit the matter back
to him so that it may be decided again, taking into consideration the defined
meaning of “property”, based on the existing evidence, or any further evidence
which the Tax Court Judge may decide to allow. I would order that the costs of
the appeal be in the cause.
“Marc Noël”
“I agree
Gilles Létourneau J.A.”
“I agree
Johanne Trudel J.A.”
FEDERAL COURT OF APPEAL
NAMES OF COUNSEL AND
SOLICITORS OF RECORD
DOCKET: A-159-09
(APPEAL FROM A JUDGMENT OF THE HONOURABLE
JUSTICE CAMPBELL J. MILLER, DATED MARCH 6, 2009, NO. 2007-1374(GST)G.)
STYLE OF CAUSE: HER
MAJESTY THE QUEEN and COSTCO WHOLESALE CANADA LTD.
PLACE OF HEARING: Toronto, Ontario
DATE OF HEARING: January 11, 2010
REASONS FOR JUDGMENT BY: Noël J.A.
CONCURRED IN BY: Létourneau J.A.
Trudel J.A.
DATED: January 13, 2010
APPEARANCES:
|
Marilyn Vardy
Suzanne
Bruce
|
FOR
THE APPELLANT
|
|
William I. Innes
Neil
E. Bass
Wendy
Brousseau
|
FOR
THE RESPONDENT
|
SOLICITORS OF RECORD:
|
John H. Sims, Q.C.
Deputy
Attorney General of Canada
|
FOR
THE APPELLANT
|
|
Fraser Milner Casgrain LLP
Toronto,
Ontario
|
FOR
THE RESPONDENT
|
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