Date: 20080423
Docket: A-203-07
Citation: 2008 FCA 158
CORAM: RICHARD
C.J.
SEXTON
J.A.
EVANS
J.A.
BETWEEN:
LIONS VILLAGE OF GREATER EDMONTON SOCIETY
Appellant
and
HER MAJESTY THE QUEEN
Respondent
REASONS FOR JUDGMENT OF THE
COURT
(Delivered from the Bench at Edmonton, Alberta, on April 23, 2008)
EVANS J.A.
[1]
This is an
appeal by Lions Village of Greater Edmonton Society (“Lions Village”) from a decision of the Tax Court of
Canada (2006 TTC 670) pursuant to the informal procedure. In that decision,
Justice Miller dismissed Lions Village’s appeal from a reassessment by the
Minister of Revenue of the amount of Goods and Services Tax (“GST”) payable by
it, pursuant to section 191 of the Excise Tax Act, R.S.C. 1985, c. E-15,
on the self-supply of two not-for-profit seniors’ housing complexes in Edmonton,
of which Lions Village was the builder.
[2]
The GST
payable on a self-supply under section 191 is a percentage of the Fair Market
Value (“FMV”) of the property. The dispute concerns the FMV of one of the
complexes, Castledowns. In order to recover the input tax credits claimed by Lions Village on the construction, the
Minister determined FMV at just under $8.3 million, the taxable construction
costs of the complex. The Minister decided not call an expert witness to
testify. The appellant’s expert appraisers did testify, having appraised the
FMV of Castledowns at approximately $4.1 million on the basis of an income
approach. Both methodologies produced almost identical FMVs for the other complex,
Railtown.
[3]
On
completion of the complexes, the occupier of a unit acquired a lease for life,
and lent to Lions
Village an amount based on the construction
and operating costs of the complex attributable to that unit. The loan was
repayable when the lease terminated, at which point Lions Village would enter into similar
agreements with another occupier.
[4]
The FMV of
the complexes arrived at by both Lions Village and the Minister did not take
account of the particular legal restrictions and regime governing the not-for-profit
complexes. However, Lions Village’s appraisers
testified that the life leases would probably lower the FMV.
[5]
Justice
Miller rejected Lions
Village’s income-based approach to
the appraisal. He held that it was inappropriate because it ignored the not-for-profit
nature of the complexes and the life leases, and assumed, wrongly, that the
complex could be marketed as condominiums or rentals. In so concluding, the
Judge cannot be said to have based his decision on an erroneous finding of fact
made in a perverse or capricious manner or without regard to the material
before him: Federal Courts Act, R.S.C. 1985, c. F-7, paragraph 27(1.3) (d).
The Judge also rejected Lions
Village’s
appraisers’ cost-based approach, on the ground that the figure arrived at was
significantly lower than the actual costs. Again, we are not persuaded that, in
so finding, the Judge made a reversible error.
[6]
Although
construction costs have been used as a basis for arriving at the FMV of
properties where, as here, there is no direct evidence (sales of comparables,
for example), Justice Miller had reservations about the appropriateness of its
use in this case, because it ignored the fact that the life lease and loan
agreements greatly reduced the actual costs to Lions Village of the construction.
However, having rejected Lions
Village’s appraisal and, in the
absence of other reliable evidence, he accepted the Minister’s FMV based on the
costs of construction.
[7]
Counsel
argued before us that the Judge had made various errors of law with respect to
the Minister’s assumption of the cost-based FMV. However, in our opinion, the
burden of proof is of little relevance in this case. The parties submitted
different figures for FMV, arrived at by different methodologies. In the
absence of other reliable evidence, the question for the Judge was which he
preferred. Having rejected Lions Village’s appraisal for the
reasons that he gave, the Judge was entitled, in the absence of other reliable
evidence, to accept the Minister’s determination of FMV as being the costs of
construction, despite the reservations that the Judge expressed about the
appropriateness of this methodology on the facts of this case.
[8]
For these
reasons, the appeal will be dismissed with costs.
“John M. Evans”
_______________________
J.A.
FEDERAL COURT OF APPEAL
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: A-203-07
APPEAL FROM
A JUDGMENT OF THE HONOURABLE MR. JUSTICE CAMPBELL MILLER DATED DECEMBER 8,
2006, DOCKET NO. 2003-1778(GST)I
STYLE OF CAUSE: Lions Village of Greater Edmonton Society v.
Her Majesty The Queen
PLACE OF HEARING: Edmonton,
AB
DATE OF HEARING: April 23, 2008
REASONS FOR JUDGMENT OF THE COURT BY: RICHARD C.J., SEXTON, EVANS, JJ.A.
DELIVERED FROM THE BENCH BY: EVANS, J.A.
APPEARANCES:
|
Mr. Gordon Beck
|
FOR THE APPELLANT
|
|
Mr. Bryan
Wigger
|
FOR THE RESPONDENT
|
SOLICITORS OF RECORD:
|
MacPherson Leslie
& Tyerman LLP
Edmonton, AB
|
FOR THE
APPELLANT
|
|
John H. Sims,
Q.C.
Deputy Attorney General of Canada
Ottawa, ON
|
FOR THE
RESPONDENT
|
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