Citation: 2010 TCC 113
Date: 20100316
Docket: 2007-4303(GST)I
BETWEEN:
AZIM M. VIRANI,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
(Edited
from the transcript of Reasons for Judgment
delivered orally from the Bench on February 15, 2008
at Vancouver,
British Columbia.)
Campbell J.
[1]
This appeal is brought
pursuant to the Excise Tax Act in respect to a Notice of Assessment
issued on September 26, 2005 for the period ending March 31, 2005. On May 19,
2005 the Minister of National Revenue (the “Minister”) received a GST/HST new
housing rebate application from the Appellant with respect to a condo unit
located at 2006 – 1155 Seymour
Street in Vancouver. The Minister disallowed the Appellant’s claim for
this rebate. The issue therefore is whether the Appellant is eligible for this
new housing rebate in respect of the Seymour Street condo
unit.
[2]
The Respondent’s
position is that the Appellant did not acquire the property as his primary
residence and that he did not occupy it as his primary residence. The Appellant
contends just the opposite – that it was his intent at the time of the purchase
to acquire and occupy the condo at Seymour Street as his
primary residence. The Appellant entered into an agreement of purchase and sale
in November of 2002 (Exhibit A-5) to purchase a yet-to-be-constructed condo
unit on Seymour Street. The purchase was based on architectural
drawings and floor plans. This purchase would make the Appellant a first-time
homebuyer. He had looked only once prior to 2002 at a potential property
purchase but, other than doing that, he had never owned real estate and had
been renting up to this point in time.
[3]
The agreement of
purchase and sale called for the payment of a number of deposits to be made to
the vendors’ solicitors. There was a mix-up respecting the unit which the
Appellant initially contracted to purchase and consequently the developer
mistakenly sold this unit to another party. As a result, the Appellant was
offered another unit for the purchase price of $312,291.00. This agreement of
purchase and sale was executed by the Appellant and the developer on
November 19, 2002. According to this contract, the Appellant was required
to pay three substantial deposits totalling $31,230.00, payable between November
19, 2002 and February 22, 2003. The unit was to be completed and available for
possession in 2004. However, because of delays, the completion date was moved
ahead to March, 2005.
[4]
The Appellant testified
that, since it was his intention to purchase and occupy this as his primary
residence, he had paid an additional amount of $4,107.73 for hardwood flooring
and for an alarm system. He wanted the alarm system because he had been robbed
in the past. Initially, the unit was to be purchased by both the Appellant and
his girlfriend, but when their relationship ended in 2004, the Appellant
approached his friend Craig Docherty to move into the Seymour Street unit to assist with the mortgage payments.
[5]
In January 2004, the
Appellant moved into his mother’s basement apartment to save money to purchase
furniture for this unit. In December 2004 and January 2005, the Appellant
began to purchase furniture. Some of these purchases were made prior to the
inspection of the Seymour
Street unit (Exhibit A-3).
[6]
The pre-delivery inspection
was scheduled for January 12, 2005 (Exhibit A‑6) and the Appellant
attended the inspection with his friend Craig Docherty. The Appellant was
disappointed with the construction flaws he saw with this unit. There were
scratches and scuff marks on the floors, walls and blinds, light fixture
problems, moulding problems, one of the walls had been angled off in a
different direction and the floor layouts were smaller than the original floor
plans, which the Appellant had viewed at the pre-construction stage.
[7]
The Appellant testified
that he decided at the time of this inspection that the unit did not meet his
expectations and that he would never be happy there. He decided to look at
other properties to purchase. According to his evidence, he purchased an
existing condo unit at Drake
Street on February 3, 2005.
He testified that he first looked at the Drake Street property about one week prior to the February 3, 2005 purchase. On
February 7, 2005 he listed the Seymour
Street unit. It sold on
February 23, 2005.
[8]
The Appellant had given
his mother notice of his intention to move out of the basement apartment and
she arranged to rent this unit. Since the Drake Street property was not yet available, the Appellant moved into the Seymour Street unit on March 4, 2005 and resided there until March
29, 2005.
[9]
His friend, Craig
Docherty, who had also given notice at his rental property and had disposed of
his furniture, moved into the unit for this period in March. The Appellant
submitted moving receipts (Exhibit A-4) for the March 29, 2005 move to the Drake Street property. These receipts show the Drake Street property as the destination for the furnishings, with
the Seymour property as the place for the pick‑up
of the items. The Appellant’s mother’s address was also listed on this invoice
as the second point of pick-up for some of the Appellant’s items. However, the
Appellant testified that the only items picked up at his mother’s address were
boxes left in the upstairs portion of her home. The Appellant and Mr. Docherty
continue to reside in the Drake
Street property today.
[10]
I am going to turn now
to my analysis. Basically, the Minister has decided that the Appellant is not
entitled to the new housing rebate because he does not meet the requirements
under subsection 254(2) of the Excise Tax Act (the “Act”). The
relevant portions of subsection 254(2) read as follows, where (and I am reading
now from paragraph 254(2)(b)),
(b) at the time the particular individual becomes liable or assumes
liability under an agreement of purchase and sale of the complex or unit
entered into between the builder and the particular individual, the particular
individual is acquiring the complex or unit for use as the primary place of
residence of the particular individual or a relation of the particular
individual[.]
[11]
The other relevant
portion of that subsection is subparagraph 254(2)(g)(i) and it states:
(i) the first individual to occupy the complex or unit as a place
of residence at any time after substantial completion of the construction or
renovation is …
and I am reading from clause (B):
(B) in the case of a residential condominium unit, an individual, or
a relation of an individual, who was at that time a purchaser of the unit under
an agreement of purchase and sale of the unit, …
and the subsection goes on, but the remaining portions
are not relevant.
[12]
The wording in this
provision is crystal clear. It specifically refers in both paragraph 254(2)(b)
and in clause 254(2)(g)(i)(B) to “an agreement of purchase and sale”. Liability
explicitly attaches to the particular individual who executes an agreement of
purchase and sale. There is no ambiguity here and I am simply rejecting
Respondent counsel’s submissions that liability arises for the Appellant when
he took legal title and assumed responsibility for the mortgage payments in
February 2005. That reasoning completely ignores the wording of
subsection 254(2).
[13]
It may be that
Respondent counsel saw the problem she had with the wording in the subsection
because she did not specifically address “the time of purchase” until I asked
her thoughts on this at the end of her submissions. I believe her response was
that the reference to the “agreement of purchase and sale” was raised in
paragraph (b) of subsection 254(2). Well, it is certainly more than “raised”,
as she put it, because the liability is directly referenced to an agreement of
purchase and sale and not to any later event.
[14]
Respondent counsel
argued that the Appellant assumed no liability until February 2005 because in
November 2002 he did not have legal title. She characterized the November 2002
document as a pre‑construction agreement. That may be exactly what it is
but, nonetheless, the contract was clearly an agreement of purchase and sale as
referenced and contemplated in this provision. In fact, Exhibit A-3 titles it
“contract of purchase and sale”. This document solidly committed the Appellant
to, and made him liable for, the purchase of the Seymour Street property. The deposits totalled over $31,000.00.
Therefore, I believe that the intention of the Appellant to acquire and occupy
the Seymour Street unit as his primary residence must be
determined in November 2002 when he executed the agreement of purchase and sale
and not in February 2005 when the actual transfer of legal title and possession
occurred.
[15]
Respondent counsel
argued that, even if I decided it was the November 2002 date in which the
Appellant’s intention should be determined, there was no evidence to support
his position that he intended this unit to be his primary residence. Subsection
254(2) instructs the Minister to pay a rebate to a “particular individual”
where a builder makes a supply by way of a sale of a unit to a particular
individual (in this case the Appellant) and at the time this particular
individual becomes liable under an agreement of purchase and sale in acquiring
a unit for use as his primary place of residence. I believe the evidence fully
supports my conclusion that, in November 2002 when the Appellant executed his
agreement of purchase and sale for the Seymour Street unit, he fully intended it to be his primary place of
residence. I base my conclusion on the following factors:
1. He had no history
or experience in the real estate market as he was a first-time home owner,
having looked at only one prior property before the Seymour Street purchase;
2. He wanted to get
out of the rental market and the fact that his mortgage payments would be less
than his rental payments formed part of the basis for this purchase;
3. Between the time he
executed the agreement of purchase and sale in November 2002 and the date he
inspected the completed Seymour Street unit on January 12, 2005, he was
not in the market viewing or investigating other real estate opportunities and
did so only when he encountered the construction flaws and problems on the
Seymour Street condo unit after the inspection;
4. He persevered
through a two-and-a-half year delay for completion of the unit, lived for
approximately one year at his mother’s residence in order to save money for
furniture, and initially accepted an alternate unit when his first choice was
mistakenly sold to someone else;
5. He began purchasing
furniture in December 2004 for this unit prior to the date of inspection on
January 12, 2005; and
6. He requested
additional items in terms of hardwood flooring and an alarm system for this
unit.
[16]
There is no evidence in
November 2002 that the Appellant intended to acquire and occupy the Seymour Street unit for any other purpose except to reside in it as
his primary residence. Even if I agreed with Respondent counsel that the Act
requires that intent be determined in February 2005, I would still reach the
same conclusion. Up until January 12, 2005, the date of the inspection, the
Appellant’s course of conduct supports his stated intention to acquire this
unit and occupy it as his primary residence.
[17]
Respondent counsel
pointed to one invoice for furniture dated January 29, 2005 as problematic in
that the items were probably purchased for the Drake Street unit and not the Seymour unit. However, the Appellant pointed out
that these items were selected prior to looking at the Drake Street property, but because they were unavailable at the premises and had to
be ordered by the store, the payment receipt and invoice show a date subsequent
to the Drake Street viewing.
[18]
Respondent counsel also
pointed to discrepancies with respect to dates in several statements and
documents signed by the Appellant and forwarded to CRA during 2007. Some of
these did not accord with his oral evidence, but I accept his explanation for
the differences, as I have no reason to doubt the evidence he provided in Court.
These documents were drafted by an agent who was assisting him on settling the
issue with CRA and he simply signed them without giving the various dates much
thought.
[19]
In addition, he
adequately responded to counsel’s queries concerning the fact that in March
2005, when he lived in the unit, there were no accounts billed to this address.
He indicated that because the Hydro bill was never set up, the discrepancy was
handled by a notary. He used a cell phone and had no landline account for this
address and he did not want to pay the two installation fees for cable.
Although by March 4, 2005, when he moved into the property, he had purchased
the Drake Street unit, the Seymour Street unit was for this time his primary place of
residence. He had the keys, he had legal title and possession of the unit, and
he had moved his furniture in. According to the evidence of Mr. Docherty, his
roommate, Mr. Docherty had disposed of his own furniture and moved in, and any
expenses associated with this unit during this period, including the liability
for the mortgage payments, were solely the Appellant’s responsibility.
[20]
When I look to the
governing provision, paragraph 254(2)(b), the Appellant, in November 2002 when
he executed the agreement of purchase and sale with the developer, assumed the
liability in respect to the Seymour Street unit and his intentions, supported
by his course of conduct, were to acquire and occupy that unit upon its
completion. If I look at clause 254(2)(g)(i)(B), I believe it is meant to apply
to those circumstances where the purchaser in the first instance at the pre‑construction
stage enters into an agreement of purchase and sale to sell upon completion.
This provision instructs the Minister to pay the rebate to the first individual
who occupies the unit as a place of residence at any time after the unit
has been substantially completed.
[21]
This section of the
provision again identifies that individual as a purchaser “under an agreement
of purchase and sale”. It is also interesting to note that in this portion of
the section, the residence is referred to simply as “place of residence”
without reference to “primary place of residence”. However, based on my
conclusions, I feel no need to canvass the potential ramifications pertaining
to the deletion of the word “primary” in reference to place of residence in
this paragraph.
[22]
Accordingly, the appeal
is allowed.
Signed at Toronto, Canada, this 16th
day of March 2010.
“Diane Campbell”
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