Docket: 2008-252(GST)I
BETWEEN:
ISABELLE COSTA REGO,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
[OFFICIAL ENGLISH
TRANSLATION]
____________________________________________________________________
Appeal heard on common evidence with the
appeals of
Teresinha Costa Rego (2008-255(GST)I), Miguel
Sousa Rego
(2008-256(GST)I) and Christine Costa Rego
(2008-275(GST)I),
on November 25, 2008, at Ottawa, Ontario
Before: The Honourable Justice Réal Favreau
Appearances:
|
Counsel for the
Appellant:
|
Chantal Donaldson
|
|
Counsel for the Respondent:
|
Maryse
Nadeau-Poissant
|
____________________________________________________________________
JUDGMENT
The appeal from the assessment made under
Part IX of the Excise Tax Act, notice of which is dated
November 30, 2006, and bears the reference number 85940 0368 RT 0001,
is dismissed in accordance with the attached Reasons for Judgment.
Signed at Montréal,
Quebec, this 23rd day of January 2009.
"Réal Favreau"
Translation
certified true
on this 10th day
of February 2009.
Brian McCordick,
Translator
Docket: 2008-255(GST)I
BETWEEN:
TERESINHA COSTA REGO,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
[OFFICIAL ENGLISH
TRANSLATION]
____________________________________________________________________
Appeal heard on common evidence with the
appeals of
Isabelle Costa Rego (2008-252(GST)I), Miguel
Sousa Rego
(2008-256(GST)I) and Christine Costa Rego
(2008-275(GST)I),
on November 25, 2008, at Ottawa, Ontario
Before: The Honourable Justice Réal Favreau
Appearances:
|
Counsel for the
Appellant:
|
Chantal Donaldson
|
|
Counsel for the Respondent:
|
Maryse
Nadeau-Poissant
|
____________________________________________________________________
JUDGMENT
The appeal from the assessment made under
Part IX of the Excise Tax Act, notice of which is dated
November 30, 2006, and bears the reference number
85942 5167 RT 0001, is dismissed in accordance with the attached
Reasons for Judgment.
Signed at
Montréal, Quebec, this 23rd day of January 2009.
"Réal Favreau"
Translation
certified true
on this 10th day
of February 2009.
Brian McCordick, Translator
Docket: 2008-256(GST)I
BETWEEN:
MIGUEL SOUSA REGO,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
[OFFICIAL ENGLISH
TRANSLATION]
____________________________________________________________________
Appeal heard on common evidence with the
appeals of
Isabelle Costa Rego (2008-252(GST)I),
Teresinha Costa Rego
(2008-255(GST)I) and Christine Costa Rego
(2008-275(GST)I),
on November 25, 2008, at Ottawa, Ontario
Before: The Honourable Justice
Réal Favreau
Appearances:
|
Counsel for the Appellant:
|
Chantal Donaldson
|
|
Counsel for the Respondent:
|
Maryse Nadeau-Poissant
|
____________________________________________________________________
JUDGMENT
The appeal from the assessment made under
Part IX of the Excise Tax Act, notice of which is dated
November 30, 2006, and bears the reference number
85750 8923 RT 0001, is dismissed in accordance with the attached
Reasons for Judgment.
Signed at Montréal, Quebec, this 23rd day of January
2009.
"Réal Favreau"
Translation
certified true
on this 10th day
of February 2009.
Brian McCordick,
Translator
Docket: 2008-275(GST)I
BETWEEN:
CHRISTINE COSTA REGO,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
[OFFICIAL ENGLISH
TRANSLATION]
____________________________________________________________________
Appeal heard on common evidence with the
appeals of
Isabelle Costa Rego (2008-252(GST)I),
Teresinha Costa Rego
(2008-255(GST)I) and Miguel Sousa Rego
(2008-256(GST)I)
on November 25, 2008, at Ottawa, Ontario
Before: The Honourable Justice Réal Favreau
Appearances:
|
Counsel for the
Appellant:
|
Chantal Donaldson
|
|
Counsel for the Respondent:
|
Maryse
Nadeau-Poissant
|
____________________________________________________________________
JUDGMENT
The appeal from the assessment made under
Part IX of the Excise Tax Act, notice of which is dated
November 30, 2006, and bears the reference number
85940 5565 RT 0001, is dismissed in accordance with the attached
Reasons for Judgment.
Signed at
Montréal, Quebec, this 23rd day of January 2009.
"Réal Favreau"
Translation
certified true
on this 10th day
of February 2009.
Brian McCordick, Translator
Citation: 2009 TCC 48
Date: 20090123
Dockets: 2008-252(GST)I,
2008-255(GST)I,
2008-256(GST)I,
2008-275(GST)I
BETWEEN:
ISABELLE COSTA REGO,
TERESINHA COSTA REGO,
MIGUEL SOUSA REGO,
CHRISTINE COSTA REGO,
Appellants,
and
HER MAJESTY THE QUEEN,
Respondent.
[OFFICIAL ENGLISH
TRANSLATION]
REASONS FOR JUDGMENT
Favreau J.
[1]
Each of the Appellants
separately filed an application with the Minister of Revenue of Québec
("the Minister") for a new residential rental property GST
rebate in respect of a triplex that they co-owned. Their respective shares in
the ownership of the property are 33.33% each for Christine and Isabelle Costa
Rego, and 16.66% each for Miguel Sousa Rego and Teresinha Costa Rego.
The Appellants live in one of the units (41.39% of the total area of the
building). Individuals related to the Appellants (specifically, Miguel Sousa
Rego's mother and sister) occupy another unit as a place of residence (34.60%
of the total area of the building) and the third unit (24.01% of the total
area) is rented as a place of residence by a third party.
[2]
On March 14, 2003, the
Appellants jointly acquired an undeveloped parcel of land at 8 Crépuscule Street
in Gatineau, Quebec. From March to October 2004, the Appellants engaged
a contractor to build a triplex, in respect of which GST rebates were claimed. On the
claim forms, the Appellants declared that they were the purchasers and the
lessors (claim form No. 6).
[3]
The Minister was of the
opinion that the triplex was primarily used as a place of residence for the
Appellants and for individuals related to them. He determined that the
Appellants were not required to remit GST to the Respondent on the self‑supply
of the triplex, as contemplated in subsection 191(3) of the Excise Tax
Act (ETA), since they came under the exception set out in subsection 191(5)
of the ETA. Consequently, the Appellants were refused the new residential
property GST rebate that they had claimed under subsection 256.2(3) of the
ETA. Accordingly, the Minister issued assessments which stated that
it was unnecessary to pay the tax on the self-supply of a residential rental
property, and which denied the residential complex GST rebate. The Appellants
have appealed from these assessments.
[4]
In making the above determination,
the Minister assumed that each of the Appellants was a "builder" of a
complex within the meaning of section 123 of the ETA, which reads:
"builder" of a residential
complex or of an addition to a multiple unit residential complex means a person
who
(a) at a time when the person has an interest in the
real property on which the complex is situated, carries on or engages another
person to carry on for the person
. . .
(ii) in the case of a residential condominium
unit, the construction of the condominium complex in which the unit is
situated, and,
. . .
Since the Appellants engaged another person to
construct their complex at a time when they had an interest in the land on
which the complex was situated, each of the Appellants was a
"builder" within the meaning of the ETA.
[5]
In the Minister's
submission, the exclusion from the definition of the term "builder",
for an individual who engages a person to construct a complex in a non‑business
context, does not apply to the case at bar because the Appellants supplied
property by way of lease to a third party on a regular and continuous basis by
renting one of the three units of their complex to that third party. The term "business"
is defined as follows in section 123 of the ETA:
"business" includes a
profession, calling, trade, manufacture or undertaking of any kind whatever,
whether the activity or undertaking is engaged in for profit, and any activity
engaged in on a regular or continuous basis that involves the supply of
property by way of lease, licence or similar arrangement, but does not include
an office or employment.
[6]
Under subsection
256.2(3) of the ETA, a person who is a builder of a residential complex is
entitled to a GST rebate in respect of the land and building leased for
residential purposes where the builder is deemed, under section 191 of the ETA,
to have made and received a taxable supply by way of sale of the building.
[7]
Subsection 191(3) of
the ETA creates the irrebuttable presumption whereby, under certain
circumstances, the builder of a multiple-unit residential complex is deemed to
have made and received a taxable supply by way of sale of the complex. This is
known as the rule regarding the "self-supply of a multiple-unit
residential complex". However, an exemption exists where the complex is
used for personal purposes. Specifically, subsection 191(5) of the ETA
states that, where the builder is an individual and the complex is used
primarily as a place of residence by the individual or an individual related to
the individual, subsections 191(1) through (4) of the ETA do not apply to
that builder. Subsection 191(5) of the ETA reads as follows:
191. (5) Exception for personal use — Subsections (1) to (4) do not apply to a builder of a residential
complex or an addition to a residential complex where
(a) the builder is an individual;
(b) at any time after the construction or
renovation of the complex or addition is substantially completed, the
complex is used primarily as a place of residence for the individual, an
individual related to the individual or a former spouse or common-law partner
of the individual;
(c) the complex is not used primarily for any
other purpose between the time the construction or renovation is substantially
completed and that time; and
(d) the individual has not claimed an input tax
credit in respect of the acquisition of or an improvement to the complex.
[Emphasis
added.]
[8]
The entire dispute in
the instant case concerns the interpretation of the underlined portion of
paragraph 191(5)(b) of the ETA. The term "primarily" in this
context means more than 50% of the total area of the complex (see Foote v.
Canada, 2007 TCC 46, [2007] T.C.J. No. 17 (QL)).
[9]
Counsel for the
Appellants submits that they reside in a single unit of the triplex and do not
occupy more than 50% of the complex. In her submission, the fact that
Miguel Costa Rego's mother and sister live in another unit of the
complex should not be taken into account. She argues that the enactment refers
to a complex used primarily as a place of residence for an individual or
for an individual related to the individual. She submits that the wording of
the enactment must not be interpreted to mean "used
primarily . . . for the individual and an individual
related to the individual." In other words, the conjunction "or"
in paragraph 191(5)(b) of the ETA is exclusive, in that the condition
required by it should be fulfilled if only one of the criteria therein is met.
[10]
Counsel for the
Appellants relies, inter alia, on a decision of the Court of Québec,
namely Fortin v. Québec (Sous-ministre du Revenu), [2006] R.D.R.Q. 153, where
it was held that the word "or" in subsection 227(2) of the Act respecting
the Québec sales tax, which corresponds to subsection 191(5) of the
ETA, designates an alternative, not a conjunction. Consequently, the court held
that the Minister should not take into account the use of part of the complex
by one of the applicants' parents. The Minister appealed from the decision
but the applicants abandoned their appeal.
Analysis
[11]
In a decision rendered
on November 25, 2008 in Coutu v. Canada, 2008 TCC 641, Lamarre
J. of this Court interpreted the phrase "the complex is used
primarily as a place of residence for the individual, an individual related to
the individual or a former spouse or common-law partner of the individual",
as used in paragraph 191(5)(b) of the ETA. The facts of Coutu are
very similar to the facts of the case at bar. There, the appellants had built
the triplex and lived in one of the units (48% of the total area). The parents
of the appellant Coutu lived in another unit (22% of the total area) and
the third unit, which accounted for the remainder of the area of the complex,
was rented to a third party.
[12]
Following a detailed
examination of
(i) cases
concerning the meaning of the word "or" (Radage v. Canada,
[1996] T.C.J. No. 730 (QL), Russell v. Canada, [2001] T.C.J. No. 409 (QL),
CCH Canada Ltd. v. Law Society of Upper Canada, 2002 FCA 187, [2002] F.C.J. No. 690
(QL) and Mercier v. Canada, [1997] T.C.J. No. 613
(QL);
(ii) the
Explanatory Notes concerning subsection 191(5) of the ETA (Canada, Department
of Finance. Goods and Services Tax: Explanatory Notes to Bill C-62 [S.C.
1990, c. 45] as Passed by the House of Commons on April 10, 1990
(Ottawa: Department of Finance, May 1990)) regarding the self-supply of a
residential complex;
(iii)
the grammatical
definition of the word "ou" in the Dictionnaire des
difficultés du français; and
(iv)
the impact of the use
of a comma between the word "particulier" (individual) and the
words "son ex‑époux ou conjoint de fait ou un particulier lié à
ce particulier" (an individual related to the individual or a former
spouse or common-law partner of the individual),
Lamarre J. concluded as
follows, at paragraph 18:
[18] In my opinion, the context and the
legislative intent indicate that the word "ou" is being used in an
inclusive sense and expresses a conjunction, not a disjunction. . . . .
[13]
I fully agree with that
interpretation. The interpretation desired by the Appellants would unduly
restrict the scope of the personal-use exception and could not be justified
from the perspective of the tax policy underlying the provision.
[14]
I also agree with the
Minister's position that the Appellants are builders for the purposes of the
ETA because they always intended to engage, on a regular and continuous basis,
in an activity involving the supply of property (housing) by way of lease. They
did so prior to having the Crépuscule Street triplex built, and they continued
to do so while they were living in it.
[15]
From a legal standpoint,
the Appellants completed two separate and distinct transactions, namely the
initial purchase of the parcel of land, and the subsequent formation of a construction
contract with the contractor. Contrary to the submissions of counsel for the
Appellants, one cannot consider them to be a single, two-stage transaction
because there is no connection between the two transactions.
[16]
For these reasons, the
appeals are dismissed and the assessments dated November 30, 2006,
are confirmed.
Signed at Montréal, Quebec, this 23rd day of January
2009.
"Réal Favreau"
Translation
certified true
on this 10th day
of February 2009.
Brian McCordick,
Translator
CITATION: 2009 TCC 48
COURT FILE NO.: 2008-252(GST)I, 2008-255(GST)I,
2008-256(GST)I,
2008-275(GST)I
STYLES OF CAUSE: Isabelle Costa Rego v. HMQ
Teresinha
Costa Rego v. HMQ
Miguel
Sousa Rego v. HMQ
Christine
Sousa Rego v. HMQ
PLACE OF HEARING: Ottawa, Ontario
DATE OF HEARING: November 25, 2008
REASONS FOR
JUDGMENT BY: The Honourable Justice Réal Favreau
DATE OF JUDGMENT: January 23, 2009
APPEARANCES:
|
Counsel of the
Appellant:
|
Chantal Donaldson
|
|
Counsel for the Respondent:
|
Maryse
Nadeau-Poissant
|
COUNSEL OF RECORD:
For the
Appellants:
Name: Chantal Donaldson
Firm:
For the
Respondent: John H. Sims, Q.C.
Deputy
Attorney General of Canada
Ottawa,
Canada
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