Lind v. The Queen, docket 1999-3016-GST-I (Informal Procedure)

Date: 20011116

Docket: 1999-3016-GST-I

BETWEEN:

JOYCE LIND,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

Reasonsfor Judgment

Beaubier, J.T.C.C.

[1]            This appeal pursuant to the Informal Procedure was heard at Nanaimo, British Columbia on November 5, 2001. Joyce Lind testified and called Ronald Brass, accountant of Canada Customs and Revenue Agency ("CCRA") in Victoria; Robert Primeau, audit officer of CCRA in Victoria; and Kenneth Chow, appeals officer of CCRA in Victoria, to testify. The Respondent called Ian McKenzie ("Ian") to testify.

[2]            Paragraphs 5 to 10 inclusive of the Reply to the Notice of Appeal outline the facts and issues in dispute. They read:

5.              The Appellant submitted a general application for rebate of Goods and Services Tax paid in error dated October 15, 1997 (the "Rebate") in the amount of $12,997.71 to Minister of National Revenue the ("Minister") in respect of the purchase of a residential condominium unit with civil address 303-2275 Comox Avenue, Comox, B.C. (the "Unit").

6.              By Notice of Assessment dated July 21, 1998 (the "Assessment"), the Minister assessed to deny the claim for the Rebate.

7.              In so assessing to deny the Rebate, the Minister relied on the following assumptions of fact:

(a)            the facts admitted and stated above;

(b)            the Appellant purchased the Unit from Contract Holdings Ltd. (the "Builder"), on October 1, 1997;

(c)            the Builder was registered for purposes of the Goods and Services Tax ("GST") effective January 1, 1991 and was assigned business no. 101131621;

(d)            at the relevant time, the Builder was involved in the business of the buying and selling real estate;

(e)            the Builder acquired the Unit from Emerald Hill Shoreline Estate Ltd. at a time when the construction of the Unit was substantially completed and before it had been occupied by an individual as a place of residence or lodging;

(f)             the Builder acquired the Unit for the primary purpose of making a supply of the Unit by way of sale;

(g)            due to poor market conditions, the Builder was unable to immediately sell the Unit;

(h)            Ian McKenzie, an officer of the Builder, placed furniture within the Unit in an attempt to induce a sale;

(i)             McKenzie did not have his mail delivered to the Complex, nor was he responsible for payment of the utility bills;

(j)             McKenzie did not retain a telephone listing at the Complex;

(k)            the Builder sold the Unit to the Appellant for consideration equal to $194,000, including the applicable GST, with the Appellant assigning her right to the GST New Housing Rebate to the Builder;

(l)             the Unit had not been used as a place of residence by any person prior to the sale of the Unit to the Appellant;

(m)           the Builder credited in favour of the Appellant a GST New Housing Rebate in respect of the purchase of the Unit in the amount of $4,679.17; and

(n)            on March 13, 1998, the Minister received and subsequently approved an application by the Builder for a GST New Housing Rebate in respect of the sale of the Unit to the Appellant.

B.             ISSUES TO BE DECIDED

8.              The issues are:

(a)            whether the Builder is a "builder" of the Unit as defined in section 123 of the Act;

(b)            whether the Builder was required to self-assess in respect of a deemed supply and acquisition of the Unit pursuant to section 191 of the Excise Tax Act (the "Act"); and

(c)            whether the Appellant is entitled to the Rebate pursuant to section 261 of the Act.

C.             STATUTORY PROVISIONS RELIED ON

9.              The Deputy Attorney General of Canada relies on sections 123, 165, 191, 261, and section 2 of Part I of Schedule V to the Act.

D.             GROUNDS RELIED ON AND RELIEF SOUGHT

10.            He respectfully submits that the Minister properly assessed the Appellant by denying the Rebate on the basis that:

(a)            the Builder was the "builder" of the Unit within the meaning of subsection 123(1) of the Act at the time that the Unit was sold to the Appellant;

(b)            the Builder was not required to self-assess pursuant to section 191 of the Act as the Unit was not occupied as a place of residence of any person prior to its sale to the Appellant;

(c)            the Appellant received a taxable supply of the Unit from the Builder and was required to pay tax in respect of that supply pursuant to section 165 of the Act; and

(d)            the Appellant's payment of tax to the Builder was not made in error and section 261 of the Act is therefore not applicable in the circumstances.

[3]            None of the assumptions were refuted by the evidence except that Ian McKenzie was not an officer of the builder. However, assumptions 7(d), (e) and (l) require some explanation since they are at the centre of the dispute between the parties.

[4]            Contract Holdings Ltd. ("Contract") was controlled by Ian McKenzie's parents. In 1995 Emerald Hill Shoreline Estate Ltd. ("Emerald") was owned by a joint venture of corporations in which Ian had an interest. Ian also owned about 11% of the equity in Contract.

[5]            In 1995 Emerald was building three condominium complexes in Comox, British Columbia on the east side of Vancouver Island, about 200 kilometres north of Victoria. Sales were slow and therefore Contract bought units 303 and 307 in complex 3, the first to be completed. The units were both unused in any way and were new and Contract bought them for the purpose of selling them. Therefore Contract was a "builder", as defined in the Excise Tax Act, subsection 123(1), at that time.

[6]            In 1996 Contract still had not sold the units. They were listed with a broker. Ian moved some furniture he had in storage in Victoria into unit 303 to make it display better for sales purposes. Both suites were over 1500 square feet in size, but unit 307 was a penthouse unit and so it was expected to sell more easily.

[7]            It is clear from the evidence that Ian's financial condition was difficult by 1996. He had sold his home in Victoria to assist in his financial obligations respecting the Emerald development. He was a bachelor and moved into a room in a friend's home in Richmond on the mainland, and he had a job in his own corporation selling furniture in the Vancouver area. His financial restrictions continued throughout the entire period in dispute.

[8]            He testified that once he moved furniture into unit 303 he stayed there when he visited Comox for a total of 9 to 11 weekends while he checked on the contractor building complexes 1 and 2 and the realtor selling units 303 and 307 was changed and the commission was increased. The Court believes him. His job and future was in the Richmond/Vancouver area. The Comox development was not the profitable enterprise hoped for, but it had to be finished and sold and Ian was not only stuck in it but he had persuaded his parents to invest in it through Contract. Therefore Comox had to be followed up on, but Ian's living was in Richmond. Joyce Lind disputed this but she did not call witnesses from the complex in Comox who might have seen Ian there in 1996 and 1997 and she had no personal knowledge of Ian's time in Comox herself.

[9]            In September, 1997 Joyce and her husband, Gordon, inspected unit 303 about three times and made an offer to purchase it which Contract accepted. On October 1, 1997 the Linds purchased unit 303, 2275 Comox Avenue, Comox, British Columbia. There were furniture, pictures, a Queen's University certificate, albums in storage, some food in cupboards and the refrigerator and a washer and dryer which were not hooked up, in the premises. Various items were stored in the garage. In addition, Ian had rented storage space in unit 303's garage for six months to another unit owner in complex 3 for $300. Joyce argued that Ian either resided or lodged in unit 303 before the Linds bought it.

[10]          On the evidence before the Court:

1.              Ian resided in the Vancouver area at all material times.

2.              Ian had no lease or licence to reside or lodge in unit 303.

3.              Ian was in unit 303 at odd intervals for one or two nights a maximum of 11 times in 1996 and 1997 while he attended to tasks for the sale of units 303 and 307 or the construction of the other two complexes. He had no other purpose in being there. Ian stayed in unit 303 because it was cheaper than staying in a hotel in Comox.

4.              Ian's furniture was in unit 303 partly to assist in selling unit 303. It also provided him with free storage.

5.              Ian did not pay for any utilities. Contract did. On one occasion Linda Manner, a corporate representative of another joint venturer used unit 303 while on her corporate business. She was a single mother with a small child who may have put a "potty" in unit 303 for her child. Ian had no telephone or mailing address in unit 303. His mailing address was in the Vancouver area and he used a cell phone. Ian also owned a summer cottage at Cowichan Lake for recreation purposes throughout the period in question.

6.              Ian insured the furniture in unit 303 by a rider on his residential policy, on the basis that the furniture was in storage.

7.              Ian had no intention, ever, to reside in unit 303, or to lodge there.

8.              Ian was Contract's representative on the strata board for the complexes and attended two board meetings in that capacity, but not in the capacity of a resident in the complex.

9.              There is no evidence that Ian kept any clothing in unit 303. There is accepted evidence that he took bed linens from and back to Vancouver for unit 303, when he used 303.

[11]          The Court accepts Ian's evidence respecting the foregoing because he is credible. In addition, the Appellant could have called eye witnesses to Ian's alleged occupancy of unit 303 from the complex where she lives in Comox as cheaply and more easily than she subpoenaed the CCRA witnesses that she called to testify. The Appellant did not do this and as a result, there is no first-hand evidence of witnesses to refute Ian's testimony. The Court finds that unit 303 was not occupied by Ian as a place of residence, on the basis of the facts outlined in paragraph [10]. Therefore, subsection 191(1) of the Excise Tax Act is not applicable and there is no deemed self-supply as provided therein.

[12]          The acquisition by Contract of unit 303 having taken place prior to Ian's occupancy of the unit, the nature of Ian's occupancy cannot alter the character of Contract as being the "builder" of unit 303. Therefore, section 2 of Part I of Schedule V to the Act, does not apply to the sale of unit 303 to the Linds. The sale of unit 303 does constitute a taxable supply. In the event that Ian's occupancy of unit 303 could alter the character of Contract as being a "builder", it would have to be determined whether Ian's use of unit 303 constituted usage by Ian of unit 303 "as a place of residence or lodging". The important portions of the definition of "builder" in subsection 123(1) of the Excise Tax Act respecting this read:

"builder" of a residential complex or of an addition to a multiple unit residential complex means a person who

...

(d)            acquires an interest in the complex

...

(ii)            in any case, before it has been occupied by an individual as a place of residence or lodging,

for the primary purpose of

(iii)           making one or more supplies of the complex or parts thereof or interests therein by way of sale, or

(iv)           making one or more supplies of the complex or parts thereof by way of lease, licence or similar arrangement to persons other than to individuals who are acquiring the complex or parts otherwise than in the course of a business or an adventure or concern in the nature of trade, or

In the French version the words for "place of residence or lodging" read:

"occupé à titre résidentiel ou d'hébergement"

[13]          Unit 303 was not occupied by Ian as a place of residence but the question remains as to whether Ian occupied unit 303 as a lodging. "Lodging" is defined in the Concise Oxford Dictionary, 9th Ed., as:

l.               Temporary accommodation (a lodging for the night) ...

2.              A room or rooms (other than in a hotel) rented for lodging in.

3.              A dwelling place ...

Petit Robert, Dictionnaire de la langue française, 1990, defines "hébergement" as "Action de loger" and its second meaning of "loger" is "Établir dans une maison, de manière temporaire ou durable". This concept is carried on in the definition of "logement" which refers to "Tout local à usage d'habitation, et plus spécialte. Partie de maison, d'immeuble où l'on réside habituellement". These definitions, taken as a whole, mean that Ian's usage must be more than occasional and intermittent one or two days visits at the premises.

[14]          But Ian's visits were occasional and intermittent one or two day visits at unit 303. Ian did not rent there. He did not dwell there. Ian did not occupy unit 303 as a place of residence or lodging.

[15]          For these reasons, the appeal is dismissed.

Signed at Ottawa, Canada, this 16^th day of November, 2001.

"D.W. Beaubier"

J.T.C.C.

COURT FILE NO.:                                                 1999-3016(GST)I

STYLE OF CAUSE:                                               Joyce Lind v. Her Majesty the Queen

PLACE OF HEARING:                                         Nanaimo, British Columbia

DATE OF HEARING:                                           November 5, 2001

REASONS FOR JUDGMENT BY:                      The Honourable Judge D. W. Beaubier

DATE OF JUDGMENT:                                       November 16, 2001

APPEARANCES:

For the Appellant:                                                 The Appellant herself

Counsel for the Respondent:              Nadine Taylor

COUNSEL OF RECORD:

For the Appellant:                

Name:                               

Firm:                 

For the Respondent:                             Morris Rosenberg

                                                                Deputy Attorney General of Canada

                                                                                Ottawa, Canada

1999-3016(GST)I

BETWEEN:

JOYCE LIND,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

Appeal heard on November 5, 2001 at Nanaimo, British Columbia by

the Honourable Judge D. W. Beaubier

Appearances

For the Appellant:                                         The Appellant herself

Counsel for the Respondent:                         Nadine Taylor

JUDGMENT

          The appeal from the assessment made under the Excise Tax Act, notice of which is dated July 21, 1998 and bears number 973010468129P0001 is dismissed in accordance with the attached Reasons for Judgment.

Signed at Ottawa, Canada, this 16^th day of November, 2001.

"D.W. Beaubier"

J.T.C.C.