Extendicare Health Services Inc. v. Minister of National Health & Welfare, [1989] 2 CTC 122

Mahoney, J.A. (Heald, J.A. concurring):—This is an appeal from the dismissal with costs of the appellant's application to the Trial Division for mandamus requiring the respondent to certify its nursing homes under section 68.24 of the Excise Tax Act, R.S.C. 1985 (2d Supp.) c.7, [1987] 2 C.T.C. 179; 87 D.T.C. 5404. The appellant owns and operates nursing homes in a number of Canadian provinces. The only issue is whether they meet the definition of subsection 68.24(1).

68.24 (1) In this section,

“certified institution" means an institution that by a certificate issued by the Minister of National Health and Welfare is certified to be, as of the day specified in the certificate.

(a) a bona fide public institution whose principal purpose is to provide care for children or aged, infirm or incapacitated persons, and

(b) in receipt annually of aid from the Government of Canada or the government

of a province for the care of persons described in paragraph (a);

(Min. of National Health & Welfare)

The learned trial judge held:

There are three prerequisites for an institution to be certified under this section:

1. It must be a bona fide public institution,

2. It must provide care for children or aged, infirm or incapacitated persons, and

3. It must be in receipt annually of aid from the government of Canada or a province.

There is no disagreement that Extendicare meets conditions 2 and 3. Essentially, the applicant’s argument is that by doing so it also meets condition number 1. To accept that interpretation is to conclude that the first condition is superfluous and adds nothing to the law. Since Parliament has taken the trouble to confine the benefit of these provisions, not just to public institutions, but to bona fide public institutions, those words cannot be ignored.

It has been recognised as a "settled canon of construction” that

. a statute ought to be so construed that, if it can be prevented, no clause, sentence or word shall be superfluous, void, or insignificant. (R. v. Bishop of Oxford (1879 4 Q.B.D. 245, 261).

After citing additional authorities for that proposition and considering dictionary definitions of "institution" and “public”, he concluded that each nursing home was not a bona fide public institution because:

Finally, the term “bona fide", when used as an adjective, is generally taken to mean "honestly", "genuinely" or “in good faith”. (See Stroud's Judicial Dictionary, 4th Ed., (London, 1977, 302-305). It seems obvious that Parliament used these specific words to emphasize that tax exemptions should be reserved for organizations which, in addition to providing health care to the public, are either publicly owned or publicly operated.

Indeed, that appears to be the only interpretation which would accomplish the statute's purpose. The object of S.[68.24] is to relieve organizations which are supported entirely by tax money from paying further taxes. If an institution is created and supported by the taxpayers through one taxing authority, it doesn't make sense for it to pay taxes to another. There is no reason to conclude, however, that parliament intended by S.[68.24] to improve the profit picture of a privately- owned company even if it does provide health care services to the public.

In this conclusion, the learned trial judge has accepted the respondent's position set forth in his decision, Appeal Book, p.21.

I would like to draw your attention to the definition of the term “bona fide public” institution as it appears in our guidelines. It is defined as being an institution which has been verified as one which derives its operational authority and support from public sources as opposed to one which is owned and operated by an individual or individuals for private purposes or personal gain. A bona fide public institution would normally be incorporated under provincial legislation, such as the Societies Act governing non-profit corporations or under Part 2 of the Companies Act of Canada or recognized as being charitable or non-profit for purposes of the Federal Income Tax Act.

There was no evidence upon which the learned trial judge could conclude that certification, with the consequent entitlement to apply for the refund of excise tax paid would necessarily improve the applicant's profit picture. That is speculation. It may equally be speculated that any refund would be offset by reduced government subsidy. The proposition that a certified institution must be supported "entirely by tax money" is not borne out by the definition, which requires only that it be “in receipt annually of aid from federal or provincial governments." It stipulates no proportion, much less 100 percent. Those conclusions, however, do not go to the ratio, which is that such an institution must be "either publicly owned or operated" in the sense that it must be operated as a charity or not for profit. With respect, those are words and concepts demonstrably well known in Canadian tax legislation which are not encompassed in the concept of bona fides.

It seems to me that the term "bona fide public" is intended to convey the intent that the care provided by an institution be truly offered to the public and not just to a select segment. Examples come readily to mind. I shall not set out a list, as it is equally easy to visualize litigation as to some, but what of an institution which ostensibly offers care generally to one of the stipulated categories but refuses admission on irrelevant discriminatory bases? The good faith of its professed public character may be questioned. The modifier "bona fide” can be given an effect in the definition which is consonant with its generally accepted meaning as rightly recognized by the learned trial judge.

I would also note that where, in the Act, Parliament has chosen to limit refund entitlement to manifestations of another level of government, it has done so by specific reference to municipal and provincial governments and instrumentalities, e.g. sections 68.14, 68.26, 68.27. Likewise, the Act provides specific opportunities for refund to profit making undertakings, e.g. sections 68.16, 68.28.

Eligibility for refunds under the Act is not an end in itself. In some instances, it appears clearly intended to relieve against indirect taxation of the Crown in right of the provinces. In others, Parliament has crafted the legislation to benefit certain activities in a way it deems desirable. Those activities may be variously carried on by government instrumentalities and/ or non-governmental organizations or persons. I see no proper basis for reading into the provisions, as they apply to non-governmental organizations or persons, an exclusion where there is the intention of making a profit.

In Struthers v. Town of Sudbury (1900), 27 O.A.R. 217, the Ontario Court of Appeal dealt with a provision of the provincial Assessment Act which exempted, inter alia, public hospitals from assessment. Of the hospital in issue, it was said at page 218 ff.,

It is the private property of the plaintiffs, who are practising physicians in the town of Sudbury, and all the profits and gains derived from its management are their own personal profits and gains.

The circumstance mainly relied upon as establishing the character of the hospital as a public hospital, in addition to the fact that a comparatively general and extensive relief for sick and poor is administered there, is, that it has been placed upon the list of institutions receiving provincial aid from public moneys under the Charity Aid Act.

The taxing statute did not define the term “public hospital”. Osler, J.A., at page 221 ff., held:

In the present case the charitable element, if that were essential, is not wholly wanting, although it is not very prominently put forward. I find, however, nothing in the Assessment Act, which . . . restricts the exemption to the case of hospitals wholly or in part supported by charity.

. . . In the absence of any legislative declaration on the subject, and the words “public hospital” having no technical meaning or any precise legal meaning, it seems more reasonable to hold that they are used in their popular sense and that any institution which, though not in a strictly legal right, in a popular sense may be called a public hospital, may claim exemption. . . . We here have a hospital, in which as a building, hospital accommodation is provided for all in that part of the

(Min. of National Health & Welfare)

country who are able, to the extent of such accommodation, to take advantage of it. This accommodation is subject to the control and supervision of the Government on behalf of the public, and public funds are by statute contributed to its support. Had it been intended that the exemption should be confined to a corporate institution or one wholly or in part supported by charity, I think the Legislature would have said so, but, if there is nothing inconsistent in an institution owned by private persons and managed for their own gain, being a public hospital so far as the benefits and advantages conferred upon the public thereby are concerned, we may properly hold that the Sudbury General Hospital is a public hospital and entitled to exemption under the Act.

MacLennan, J.A., agreed in the result but would have disposed of the appeal on the basis of the hospital’s recognition under the Charity Aid Act. The remaining judges evidently concurred with both.

I find the reasoning of Osler, J.A., most persuasive. What was said of the Sudbury hospital may, on the evidence, be said mutatis mutandis of the appellant's nursing homes. Nursing home accommodation is provided for all who are able, to the extent of such accommodation, to take advantage of it. The nursing homes are all subject to the control and supervision of provincial governments on behalf of the public and public funds are contributed to all by both federal and provincial governments. Had it been intended that the refund be available only to nursing homes run by governments or as charities, Parliament could easily have said so. There is nothing inconsistent in a regulated nursing home, operated for gain, being a public institution in so far as concerns the benefits thereby conferred on the public.

Since the only basis upon which certification was refused by the respondent was that the definition of section 68.24 required exclusion of an institution operated in expectation of profit, I would allow the appeal with costs here and in the Trial Division and, pursuant to section 52(b)(i) of the Federal Court Act, direct the respondent to grant the application for certification.

MacGuigan, J.A. (dissenting):—The issue in this case is essentially whether the appellant is excluded from eligibility for a federal sales tax refund under the Excise Tax Act ("the Act") by reason of being a profitmaking company.

The only disputed aspect of the definition in section 68.24 as to which bodies may be so certified is that it must be "a bona fide public institution.” In holding that the appellant was not entitled to be a “certified institution” the learned trial judge said (Appeal Book at pp. 31-3):

What, then, is a bona fide public institution? The word “institution” was given careful consideration by Kovacs, Co. Ct. J. in Re Attorney-General of Ontario and Tufford Rest Home et al (1980, 30 O.R. (2d) 636. In that case he was deciding whether a privately-owned nursing home was subject to inspection under the Public Institutions Inspection Act, 1974 (Ont.), c. 64. He began with dictionary definitions (at 639):

I was given various definitions of "institution". The New Oxford Dictionary defines “institution” as:

3. Organization for promotion of some public object, religious, charitable, reformatory, etc.; building used by this; (esp. pop.) building used by benevolent or educational institution.

The Oxford English Dictionary gives the definition:

7. An establishment, organization, or association, instituted for the promotion of some object, esp. one of public or general utility, religious, charita- ble, educational, etc., e.g., a church, school, college, hospital, asylum, reformatory, mission, or the like.

It would appear that the connotation of "institution" bears with it the concept of it having a public object. The evidence was that the private company operating the nursing home in this instance had the object of operating a nursing home for private profit. I hold that the concept of private profit is alien to the generally-accepted meaning of an institution. I note as well that the Act is entitled, in s. 9, as “The Public Institutions Inspection Act, 1974”. (Emphasis added.) Accordingly, the concept of “institution” having a connotation of a public object, as distinguished from a private enterprise, is reinforced by the adjective “public” used in the title to the Act.

I accordingly hold that privately operated nursing homes are not "institutions" within the meaning of s. 4 of the Public Institutions Inspection Act, 1974.

I find this analysis very appropriate to the problem we are considering in this case. I would observe that, as in the statute before Kovacs, Co. Ct. J., S. 44.25 reinforces the word "institution" with the adjective “public”. Black’s Law Dictionary defines a "public institution” as

One which is created and exists by law or public authority, for benefit of public in general; e.g., a public hospital, charity, college, university; etc.

The Shorter Oxford English Dictionary gives the adjective “public” as meaning:

1. Of or pertaining to the people as a whole.

2. Done or made by or on behalf of the community as a whole.

3. That is open to may be used by, or may or must be shared by, all members of the community; generally accessible or available . . . Also (in narrower sense), that may be used, enjoyed, shared or competed for, by all persons legally or properly qualified.

4. Open to general observation.

5. Of, pertaining to, or engaged in the affairs or service of the community.

6. Of or pertaining to a person in the capacity into which he comes into contact with the community.

7. Devoted or directed to the promotion of the general welfare; public- spirited, patriotic. Now chiefly in phrase “public-spirited”.

Finally, the term "bona fide"; when used as an adjective, is generally taken to mean "honestly", "genuinely" or “in good faith”. (See Stroud's Judicial Dictionary, 4th Ed., (London, 1977) 302-305). It seems obvious that Parliament used these specific words to emphasize that tax exemptions should be reserved for organizations which, in addition to providing health care to the public, are either publicly owned or publicly operated.

Indeed, that appears to be the only interpretation which would accomplish the statute's purpose. The object of S. 44.25 [now s. 68.24] is to relieve organizations which are supported entirely by tax money from paying further taxes. If an institution is created and supported by the taxpayers through one taxing authority, it doesn't make sense for it to pay taxes to another. There is no reason to conclude, however, that Parliament intended by S. 44.25 to improve the profit picture of a privately-owned company even if it does provide health care service to the public.

The trial judge may have been in error in the last paragraph cited above where he stated the object of the Act in terms limited to "organizations which are supported entirely by tax money." There seems to be nothing in the Act to support such an interpretation, and I agree with my brother Mahoney, J.A that there is no evidence in the record that any refund would necessarily improve the appellant's profit picture.

Nevertheless, as Mr. Justice Mahoney states, the real issue is whether certification must be limited to non-profit-making organizations, a category which admittedly excludes the appellant.

(Min. of National Health & Welfare)

The appellant relied heavily on Struthers v. Town of Sudbury (1900), 27 O.A.R. 217, in which the Ontario Court of Appeal held that the privately owned Sudbury General Hospital was a “public hospital” within the meaning of the Ontario Assessment Act. In the principal judgment for a five-judge Court Osler, J.A. said (at p. 222):

In the absence of any legislative declaration on the subject, and the words “public hospital" having no technical meaning or any precise legal meaning, it seems more reasonable to hold that they are used in their popular sense and that any institution which, though not in a strictly legal right, in a popular sense may be called a public hospital, may claim exemption: Harrison’s Municipal Manual, 5th ed., p. 716. We here have a hospital, in which as a building, hospital accommodations provided for all in that part of the country who are able, to the extent of such accommodation, to take advantage of it. This accommodation is subject to the control and supervision of the Government on behalf of the public, and public funds are by statute contributed to its support. Had it been intended that the exemption should be confined to a corporate institution or one wholly or in part supported by charity, I think the Legislature would have said so, but, if there is nothing inconsistent in an institution owned by private persons and managed for their own gain, being a public hospital so far as the benefits and advantages conferred upon the public thereby are concerned, we may properly hold that the Sudbury General Hospital is a public hospital and entitled to exemption under the Act.

This conclusion of Osler, J.A. can be fully understood only if read in the context of his earlier statement as to the statutory public funds being paid to the hospital (at p. 219):

The circumstance mainly relied upon as establishing the character of the hospital as a public hospital, in addition to the fact that a comparatively general and extensive relief for sick and poor is administered there, is, that it has been placed upon the list of institutions receiving provincial and from public moneys under the Charity Aid Act, R.S.O. (1887) ch. 248.

This fact is more clearly emphasized by MacLennan, J.A. in concurring reasons as follows (at pp. 222-3):

I agree that this appeal must [be] dismissed.

It is not necessary to say what would be the proper conclusion but for the legislative recognition of the appellants’ hospital under the provisions of the Act to regulate Public Aid to Charitable Institutions, R.S.O. (1887), ch. 248. But having regard to that recognition, I think we ought to hold, as was done by the learned Chief Justice, that although in many respect the hospital is a private enterprise, the order-in-council, ratified by resolution of the Assembly, under statutory authority, has given to it a public character, which makes it a “public hospital” within the meaning of the exemption clause of the Assessment Act.

Since the other three judges are described as having simply concurred, which presumably must be taken to mean with both Osler and MacLennan, JJ.A., one must conclude that they found the reasoning of the two compatible with each other. Indeed, in my analysis both judges decided as they did for the same reason, viz., the statutory recognition of the hospital in the Charity Aid Act of 1877. There is nothing in the Excise Tax Act comparable to the recognition provided by the list of specific hospitals in Schedule A of the Charity Aid Act (to which the Sudbury General Hospital had been added by order-in-council approved by the Legislature in 1895). Moreover, even apart from this factor of statutory recognition, Struthers declares the meaning of "public hospital,” not “public institution.” It is the latter phrase of which the ordinary meaning must be sought, following the dictum of Osler, J.A.

There is nothing in the context of the words in the Exise Tax Act which appears to offer any guidance. It is true that the Act provides for refunds to some profit-making undertakings, but only in very specific situations which have no relevance to the case at bar: section 68.16 (concerning gasoline purchased for the sole use of certain named purchasers), section 68.28 (concerning certain qualified goods purchased for the sole use of small manufacturers or producers prescribed by regulation).

I find myself in agreement with the decision of Kovacs Co. Ct. J. in the Tufford case cited by the Trial Judge that the concept of institution, when reinforced with the adjective "public", does not include the notion of private profit. This exclusion of profit-making is consistent with the definition of public institution in Black's Law Dictionary, 5th ed. 1979, which the trial judge cited:

One which is created and exists by law or public authority, for benefit of public in general; e.g. a public hospital, charity, college, university, etc.

If the term bona fide adds anything to "public institution”, it can only be to strengthen its non-profit-making character.

In my view this language usage was not effectively challenged by the appellant. It is, perhaps, not the best-chosen language to exclude profitmaking ventures, but in my view its meaning is nevertheless plain.

I would therefore dismiss the appeal with costs.

Application granted.