Cheema – Federal Court of Appeal indicates that a reference to a purchaser included a bare trustee
In order to satisfy lender requirements, the individual taxpayer persuaded a friend (Dr. Akbari) to jointly sign an agreement for the purchase of a new home. The Ontario new housing rebate rules required that each individual who becomes liable under the purchase agreement is acquiring the new house as the primary place of residence of that individual or a relation. “From the beginning it was understood that Dr. Akbari would not have any real interest in the property” and, indeed, at the closing of the purchase Dr. Akbari executed a declaration of trust in favour of the taxpayer.
Stratas JA (speaking for the majority, with Webb JA dissenting) nonetheless found that Dr. Akbari’s co-signing of the purchase agreement scuppered the rebate. The fact that Dr. Akbari “had no beneficial interest in the property” was “irrelevant,” as what mattered was that Dr. Akbari became liable to the builder under the purchase agreement when he signed it. Thus, the proposition that the ETA (and ITA) focus on the beneficial owner rather than any bare trustee, should now be applied with caution. His interpretation accorded with the principle that “an interpretation that favours administrative efficiency is more likely to have been intended by Parliament over one that does not” (i.e., CRA only need look at the purchase agreement to see who is the “legal acquirer,” rather than sorting out beneficial interests.)
Part of the debate between Stratas and Webb JJA. was as to the scope of ETA s. 133, which provides that a supply of property is deemed to be made at the time the agreement for its supply is entered into. Stratas JA was not bothered that the new home did not yet exist at the time of signing the purchase agreement, stating that “Deeming provisions create legal fictions … for example, the supply of a home that is not yet constructed.” Furthermore, “As Mr. Cheema and Dr. Akbari both signed the agreement of purchase and sale, they are deemed to receive a supply of the property at the time they entered into the agreement.” This is a further indication that, notwithstanding its wording, s. 133 is to be interpreted as deeming there to be a deemed acquisition at the time of execution of the related agreement for the property’s (or service’s) supply.