P.R. Dussault, J.T.C.C.
[1] The evidence as a whole permits me
to conclude that the appellants have shown, on a balance of
probabilities, that the building that is the subject of the
dispute, did not undergo a substantial renovation according to
the definition in subsection 123(1) of the Excise Tax
Act (the "Act"). I believe that it is important to
read this definition:
"Substantial renovation" of a residential complex means
the renovation or alteration of a building to such an extent that
all or substantially all of the building that existed immediately
before the renovation or alteration was begun, other than the
foundation, external walls, interior supporting walls, floors,
roof and staircases, has been removed or replaced where, after
completion of the renovation or alteration, the building is, or
forms part of, a residential complex;
(Emphasis added.)
[2]
It seems clear to me that much of the work was for items that
must be excluded. Next, with respect to the other items, it must
be ascertained whether the building was renovated or altered to
such an extent that all or substantially all of the building that
existed immediately before the work was begun has been removed or
replaced. On the basis of the evidence before me today, I think
that there is no way for me to reach such a conclusion since the
courts have almost consistently interpreted the phrase "all or
substantially all" to mean 90 per cent or more.
[3] There are, to be sure, a few
decisions here and there holding that this is not an absolute
percentage. I myself do not consider it an absolute figure.
However, 90 per cent is what is generally understood. The
evidence before me does not permit me assert that this percentage
is even close to being reached.
[4] To begin with, I would say that
the funding obtained is in relation to the costs, which proved to
be $231,600, compared with the initial estimates, i.e., $369,400;
yet there is an enormous difference at that level. I must,
however, consider this item and I am referring here to Exhibit
A-5.
[5] I also have details regarding the
work, with photographs. For example, documents A-2 and A-3, in
addition to the testimony of Yannick Cousineau, indicate
that many items were conserved: inter alia, plumbing,
electricity, hardwood floors, pressed tin ceilings and some
walls. I have details about what was done in each apartment. I
also have Yannick Cousineau's testimony, which is, moreover,
largely borne out by Mr. Roy's testimony. The affidavit submitted
by Mr. Roy (Exhibit A-9) states the following, inter
alia:
[TRANSLATION]
The front part of the building was in good condition. It was the
back part, which was an annex to the main building, that was
damaged and not worth rebuilding. We observed at that time that
the stamped tin ceilings were in good condition, the hardwood
floors quite acceptable and that at least 50% of the plumbing
fixtures were functional. The windows in some places left
something to be desired. The roofing was in good condition,
except for the part in the rear that had been damaged by the fire
and smashed in by the fire fighters.
[6] I will pass over his evaluation,
which is his evaluation of the work that was required. He
continues as follows:
[TRANSLATION]
Having revisited the property in the last few days, I observed -
that the electrical room had been moved, - the rear annex that
was damaged by the fire had been demolished, - the pressed tin
ceilings had been conserved, - the hardwood floors had been
sanded and revarnished, - the masonry walls (stone and brick) had
been cleaned. - In fact, over 60% of the surface of the
apartments had not been altered. About 75% of the windows had
been changed. The windows changed were the most exposed. - The
balconies had been redone, - the outside stairways changed and
the railings had been made higher to bring them up to code. - In
place of the rear annex, enclosed stairwells had been built along
with storage areas. - The roofing had just been redone. It was
still good at the time.
[7] It will be noted that there is
much reference to stairs here. These are items, as we know, that
should not be taken into account. Mr. Cousineau's evaluation,
according to his documents, indicates that the average percentage
of renovation was almost 48%, in fact, nearly 49 per cent, going
apartment by apartment. In this respect, I may also refer to the
testimony of Mr. Caron, the electrician, the testimony of Mr.
Labbé, the plumber and, lastly, to the testimony of Mr.
Cloutier of the City of Québec, who visited the building
on a number of occasions, before, during and after the
renovations. Mr. Cloutier was unable to put forward a figure that
went beyond two-thirds, or 65 to 66 per cent, in terms of the
percentage of renovation. This is a person, as I said, who
visited the building on a number of occasions.
[8] Therefore, I believe that there
is no evidence that would bring me closer to 85 per cent or 90
per cent, which is the generally applied standard.
[9] As for the value of the building,
this is a very indirect item for determining the percentage of
renovation. I observed this at the outset. I do not say that it
is not a relevant item, but I do say that it is one that is very
indirect and that it is the work that was done that necessarily
constitutes the most important item. The documents before me and
the testimony, I repeat, do not permit me to conclude that 90 per
cent or more of the building was the subject of renovations
within the meaning of subsection 123(1) of the Act,
excluding all the other items, that is.
[10] Obviously, since there is no
architect's report, which would have been more specific, a report
by an architect who had verified what work had been carried out,
I must base myself on the documents before me and the testimony
describing what was really done.
[11] I cannot put an exact figure on the
percentage of work performed. However, I have no determinative
element that could tell me whether that work was 90 per cent or
more and, as I said earlier, it could even be close to this
percentage.
[12] In view of the foregoing, the appeal is
allowed and the assessment is vacated.
Signed at Ottawa, Canada, this 16th day of November 2001.
J.T.C.C.
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