REASONS
FOR JUDGMENT
Jorré J.
[1]
The Appellant applied for a Goods and Services
Tax/Harmonized Sales Tax new housing rebate in respect of a house at 161
Shirrick Drive in Richmond Hill. The Minister of National Revenue denied the
rebate.
[2]
The issue in this appeal is whether, at the time
the Appellant signed the agreement to purchase, she was purchasing the house
with the intention of using it as her family’s primary place of residence.
[3]
The Respondent assessed on the basis that the
Appellant and her family did not intend to use 161 Shirrick as their
principal residence at the time the Appellant purchased the property and that
they did not reside at 161 Shirrick Drive.
[4]
This case turns on its facts and on credibility.
It is well‑established that, when it is necessary to determine intention,
one must consider not only the individual’s stated intention but also all the
surrounding factual circumstances.
[5]
The Appellant testified, as did her husband, her
brother‑in‑law, Ebrahim, and another brother‑in‑law,
Yusuf.
[6]
The Appellant signed the agreement of purchase
and sale with respect to the 161 Shirrick Drive property on 27 June 2011.
At that time the lot was empty and the house was to be built. The closing took
place on or about 21 November 2012.
[7]
The rebate application was made on 2 January
2013 and the notice of assessment denying the rebate was dated 8 November
2013.
[8]
The Appellant and her family lived at 215
Shirrick Drive during the two or three years prior to the closing in November
2012. The property at 215 Shirrick is about 200 or 210 meters from 161
Shirrick. The properties are at opposite ends of the same block.
[9]
The purchase price set out in the agreement of
27 June 2011 was $501,490 and the Appellant had to make three deposit
payments totalling $40,000. The last instalment payment was to be made by 4 November
2011.
[10]
These instalment payments were made by her
brother‑in‑law, Ebrahim.
[11]
The Appellant testified that the house cost them
about $500,000 and that they spent about $50,000 on further improvements, for a
total of around $550,000.
The amount of approximately $50,000 was borrowed on a joint line of credit of
her husband and Ebrahim.
[12]
The house at 161 Shirrick was sold by the
Appellant about five or six months after the 21 November 2012 closing for
$625,000.
[13]
In 2010, 2011, 2012 and 2013 the Appellant and
her husband reported, approximately, the following amounts of gross income:
$34,000, $14,500, $16,400 and $13,125.
[14]
The Appellant testified that around the time of
the purchase agreement the family was looking for a new house different from
their existing one with a new kitchen and a bigger backyard.
[15]
The Appellant stated that she was excited
because the new house would have the kitchen she wanted as well as certain
other features. The property at 161 Shirrick was near their old house and,
as a result, still close to the school of their older child. It was also close
to the school that the Appellant herself was attending at the time.
[16]
According to the Appellant, when the purchase of
the new house at 161 Shirrick closed, the family moved slowly into the new
house.
[17]
They did some additional work on the new house
over the course of the first month. This included fixing up the basement and
some light fixtures.
[18]
The move was mostly carried out by family
members although they did hire some non‑family members to move some
heavier items. The non‑family members were paid in cash and the Appellant
has no receipts for the move.
[19]
They did not sell their old house.
[20]
The Appellant’s husband explained that, at the
time, the Appellant’s brother‑in‑law, Yusuf, was looking for a home
for himself and his girlfriend to move to and so they offered to rent the house
to Yusuf. He accepted and they rented the house to him.
[21]
Because the brother‑in‑law was in no
hurry to move in quickly they were able to move out slowly. The brother‑in‑law
moved into their old house with his girlfriend and paid them $1,800 a month in
cash. This gave the family some extra income.
[22]
In the course of the first month in the house at
161 Shirrick the Appellant noticed problems. This upset her and made her
sad because she wanted to live in the house.
[23]
Specifically, she noticed the noise coming from
Yonge Street as well as the bright light at night coming from Yonge Street.
Yonge Street is about 20 feet away from the house.
[24]
The Appellant was not aware of the noise prior
to moving. The noise had an effect on the ability of the children to sleep.
Indeed the school which her older child attended phoned to say that the child
was falling asleep in class.
[25]
Not only was there the noise but there was also
a safety issue for their children. Twice, their younger child, born in 2010,
ran out towards Yonge Street. There was no fence and luckily one of the parents
was able to stop the daughter.
[26]
The Appellant testified that because of the
noise and the safety issue, the Appellant and her husband spoke for two or
three months about moving out again and in January or February decided that
they could not stay there because of the safety issue.
[27]
They spoke to her brother‑in‑law,
Yusuf, who rented their old house and explained that they had to move back.
Yusuf was not happy but because of the safety issue he agreed to move.
[28]
Yusuf moved out, the family moved back to their
old house at the other end of the block and the Appellant put up the new house
for sale. Their move back to 215 Shirrick was facilitated by the fact that some
of their possessions had been left in the garage at 215 Shirrick when they
moved to 161 Shirrick.
[29]
The new house was sold within about six months
of the date on which the Appellant became the owner, 21 November 2012.
[30]
She explained that there was some pressure to
sell the house because their income was not sufficient to pay the mortgage.
[31]
The Appellant testified that she listed 161 Shirrick
Drive for sale in January 2013. They were in the house for two or three months
before moving back to 215 Shirrick.
[32]
She used the proceeds of sale to pay back her
brother‑in‑law, Ebrahim, the $40,000 in deposits he paid, to pay back the
amount borrowed on her husband and Ebrahim’s joint line of credit and to pay
the real estate commission on the sale.
[33]
The Appellant also stated that there was no
profit left after making these repayments.
[34]
The Appellant and her husband both testified
that they never notified any government agency or credit card company of their
change of address. This was because they were not at 161 Shirrick that
long and could pick up any mail from Yusuf. The husband did receive some
utility bills at 161 Shirrick but he did not keep any of them.
[35]
Whereas the old house at 215 Shirrick was
both in the Appellant’s name and her husband’s name, the new house at 161 Shirrick
was only in her name. The Appellant had no explanation for this.
[36]
In cross‑examination the Appellant stated
that she never went to look at the lot at 161 Shirrick
before they purchased it. She just looked at it on the map. She was too busy
with the children and her studies.
[37]
Much of the testimony of the Appellant’s husband
confirmed statements by the Appellant. In addition to some of the husband’s
evidence set out above, the Appellant’s husband also said the following.
[38]
When Yusuf left 215 Shirrick he went back to
live where he lived before.
[39]
The Appellant’s husband did go to look at the
property before they purchased it. He was aware that there was no barrier or
fence but the city was supposed to build either a fence or barrier.
[40]
He never thought of possible safety issues for
the children before they moved and he never thought of building a fence or a
barrier on the property at 161 Shirrick.
[41]
The Appellant’s husband also stated that their
old house at 215 Shirrick was far from the new house at 161 Shirrick and that
it is very hard to imagine what a house that you see on paper will actually be
like once it is built.
[42]
The Appellant’s brother‑in‑law,
Ebrahim, testified. He is a tailor who has shops in three locations and he is
also a part‑time real estate agent.
[43]
Ebrahim paid the $40,000 in deposits required under
the agreement of purchase on behalf of the Appellant. Approximately $30,000 of
those funds came from money he had saved and the other $10,000 came from a line
of credit. He did not charge the Appellant any interest on the loaned money and
did not mind paying the interest on the funds used from the line of credit.
[44]
It was also understood that the Appellant and
her husband were to repay him the loaned money bit by bit over time. There was
no set time for repayment.
[45]
While he was not involved in the purchase of 161
Shirrick, he did act as the Appellant’s agent for the sale. There was a 3.5%
commission; 1% of the commission was for him whereas the other 2.5% was for the
agent acting on behalf of the buyers. His commission was $6,250.
[46]
The Appellant’s brother‑in‑law,
Yusuf, testified that he and his girlfriend decided to live together. The
Appellant approached him and stated that they were thinking of renting out the
property at 215 Shirrick and offered to rent it to him. He accepted and
rented 215 Shirrick and moved in there with his girlfriend. The rent was $1,800
a month which he paid in cash and the rent was all inclusive.
[47]
He lived at 215 Shirrick for approximately three
to four months.
[48]
Although he did not know when he would leave 215 Shirrick
before moving in, he expected that he would be there for a while.
[49]
He did not notify any government agency of a
change of address. He had no utility bills for 215 Shirrick because the
rent was all inclusive and he never notified any government agency of a change of
address to 215 Shirrick. He did not change his driver’s licence because he
was too busy.
[50]
He did not have to notify any credit card
companies of a change of address because he did not have any credit cards; his
credit was bad.
[51]
Yusuf was not happy when he had to move out but
concluded he had to move out and let the Appellant and her family come back to
215 Shirrick for the safety of his niece and nephew given “. . . the way they explained it to me what was
going on in that neighbourhood”.
[52]
Moving out also led to his breaking up with his
girlfriend and he moved back to where he was living before, his parents’ house.
[53]
I do not accept substantial portions of the
evidence of the Appellant and her witnesses and, as a consequence, I do not
accept that the Appellant and her family moved into 161 Shirrick; I also
do not accept that the Appellant bought 161 Shirrick with the intention of
using it as the family’s principal place of residence.
[54]
The considerations set out below, when
considered collectively, make the Appellant’s evidence quite unlikely.
[55]
It seems unlikely that the Appellant would have
been unaware of a noise issue before closing if she intended to move to the
house.
[56]
Going to see the site of a new house before
signing the agreement of purchase and sale and going to inspect the site from
time to time during the construction of a house is common behaviour. This is
even more likely given that the new house was at the other end of the block
only 200 to 210 meters away, perhaps a three‑minute walk. It seems even
more likely given that the Appellant stated that she was excited about the new
house.
[57]
In visiting the site, it is hard to conceive
that she would not have noticed the noise from Yonge Street, particularly given
that street noise is more noticeable outside a house than inside it.
[58]
Not being conscious of the noise beforehand also
seems unlikely given that the Appellant’s brother‑in‑law Ebrahim
was a part‑time real estate agent. One expects real estate agents to be
aware of the advantages and disadvantages of particular locations and one would
expect him to point out factors such as the noise level. This would be
particularly true because he would want his brother and sister‑in‑law
to be happy in their new house and because he had a personal stake given that
he was loaning them $40,000 for an indefinite period to make the down payment.
[59]
I also have difficulty with the Appellant being
surprised by the safety issue for their small child. This was their second
child and the parents could not have been unaware of the risks of a three‑year
old running off.
One would expect the parents to make a fence a priority. It is unlikely this
would not have been foreseen.
[60]
Neither the Appellant nor her husband nor Yusuf,
who moved into their old house, notified any government agency of their move,
including the Ontario Health Insurance Plan and the Ministry of Transport of
Ontario, with respect to driver’s licences. They also failed to provide any
documents showing their new address at 161 Shirrick or, in Yusuf’s case, at
215 Shirrick.
[61]
It is well‑known that one has to notify
government agencies, particularly for one’s OHIP card and one’s driver’s licence.
Indeed, for a driver’s licence in Ontario there is a statutory requirement to
notify within six days; for OHIP the requirement is to notify within 30 days.
[62]
If the Appellant and her husband and Yusuf moved
as they stated they did, it is unlikely that they would all have failed to
notify any government agency, particularly with respect to their driver’s
licence and their OHIP card. People care a great deal about their health
coverage and their ability to drive. It is also unlikely that none of them
would have a single document that would corroborate the move by showing their
address.
[63]
In 2010, the year before the agreement of purchase
and sale of 161 Shirrick, the Appellant and her husband reported,
approximately, gross income of $34,000. In 2011, the year of the agreement of purchase
and sale, the Appellant and her husband reported, approximately, gross income
of $14,500. In 2012, the year the Appellant closed the purchase of 161 Shirrick
the Appellant and her husband reported, approximately, gross income of $16,400.
In 2013, the Appellant and her husband reported, approximately, gross income of
$13,125.
[64]
The Appellant and her husband could not have had
much in savings as they were obliged to borrow the entire $40,000 in deposits
from Ebrahim. It is hard to imagine how they, a family of two adults and two
children, could afford to buy a house for about $500,000 and then spend $50,000
on additional work with an income of $34,000 let alone an income of $16,400,
particularly when they had no plan to sell their old house at 215
Shirrick.
[65]
While Ebrahim did not charge them interest, they
would still have had to pay substantial mortgage interest on an amount of the
order of $450,000.
[66]
While the $1,800 a month in rent paid by Yusuf
would help the Appellant and her husband, the actual amount available for them
to help pay for the new house would be less since his rent was all inclusive and
would have to cover heat, electricity, water, insurance and property taxes for
161 Shirrick. Whatever was left over could help, but the Appellant and her
husband faced substantial additional costs in their new home; a mortgage with a
$450,000 principal could easily result in mortgage payments of $1,000 per month
or more.
[67]
Given the relatively low gross income reported
by the Appellant and her husband, it is unlikely that the new home at 161 Shirrick
was financially manageable for them.
[68]
When Yusuf testified about his moving out of 215 Shirrick
he stated that he felt he had to move out for the safety of his niece and
nephew given “. . . the way they explained it
to me what was going on in that neighbourhood”. (My emphasis.) The quoted
passage is odd. At the time Yusuf would have been asked to move out, he was
living at the other end of the block; as such it is strange to refer to “that
neighbourhood”.
[69]
The terminology Yusuf used is more consistent
with living in another neighbourhood than with living at the other end of the
block.
[70]
For all these reasons, I am not persuaded that
the Appellant bought the property at 161 Shirrick with the intention of
using it as the family’s principal place of residence. Accordingly, the appeal
is dismissed without costs.
Signed at Ottawa, Canada, this 7th day of March 2017.
“Gaston Jorré”
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