Date: 20010410
Docket: 2000-554-GST-I
BETWEEN:
JAMES N. & MONIQUE P. CAIRNS,
Appellants,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
Sarchuk J.T.C.C.
[1]
This is an appeal by James N. and Monique P. Cairns from an
assessment by the Minister of National Revenue (Minister) dated
April 19, 1999 denying their application for a rebate of goods
and services tax (GST).
[2]
There is agreement regarding the following facts. On October 27,
1994, the Appellants purchased, as a personal residence, a
residential strata unit at 3C-328 Taylor Way, West
Vancouver and in doing so, acquired a lease interest by way of
assignment of one of the stratified leases converted from the
developer's lease. The purchase price was $370,000 in
addition to which the Appellants were required to and did pay to
the vendor the amount of $25,900 as GST. The transaction was
completed on October 27, 1994. A General Application for
Rebate of the full amount of GST paid was filed by the Appellants
and received by the Minister on October 1, 1998. On April 19,
1999, the rebate was denied by the Minister on the basis that it
had not been filed within the prescribed time period as set out
in subsection 261(3) of the Excise Tax Act (the
Act).
[3]
Mr. Cairns testified that the property in issue, a suite, was
purchased primarily to accommodate the needs of his wife who was
seriously ill. However, by the time the transaction was
completed, it had become evident that they could not take
occupancy because of the severity of her health problems and her
reluctance to move. As Mr. Cairns put it, "she just
didn't want to leave her own home". In November 1994,
Cairns became concerned that their failure to take occupancy
might affect their right to obtain a new housing rebate. As a
result, he made enquiries at Revenue Canada and advised the agent
that because of his wife's health problems, they were unable
to occupy the property and sought to confirm his understanding
that GST was refundable on the purchase. The advice he received
from Revenue Canada at that time was that they were not eligible
for the new housing rebate. He further testified that he was
advised that "irrespective of whether you've occupied it
or not, you have four years from the time that you purchased it
to claim the GST rebate". He added that at all relevant
times, they continued to believe that they had four years from
the time of purchase to determine the GST rebate situation. Then
when the situation was clarified by the decision in Taylor and
Redmond v. The Queen,[1] the Appellants filed their General Application
for Rebate dated September 29, 1998. This was Cairns said
approximately one month prior to the expiration of what they had
been advised to be the four-year permissible period.
[4]
The Appellants were not represented by counsel. Mr. Cairns had
been present in Court throughout the hearing of the appeals in
the Earnshaw and Throness v. The Queen, Alfred v. The
Queen and May v. The Queen[2] appeals. On behalf of himself and his
wife, he asked the Court to consider the position and arguments
advanced in those cases and apply them to their appeal. There was
no objection from counsel for the Respondent.
Legislative Scheme
[5]
The relevant provisions of the Act in effect on October 1,
1998 when the Appellants General Application for Rebate was
received by the Minister[3] read as follows:
261(1) Where a person has paid an
amount
(a)
as or on account of, or
(b)
that was taken into account as,
tax, net tax, penalty, interest or other obligation under this
Part in circumstances where the amount was not payable or
remittable by the person, whether the amount was paid by mistake
or otherwise, the Minister shall, subject to subsections (2) and
(3), pay a rebate of that amount to the person.
...
261(3) A rebate in respect of an
amount shall not be paid under subsection (1) to a person unless
the person files an application for the rebate within two years
after the day the amount was paid or remitted by the person.
Subsection 261(3) as it read at that time reflected an
amendment made in 1997 reducing the prior limitation period from
four years to two years. The amendment further provided that:
71(2) Subsection (1)
applies:
(a)
to amounts that, after June 1996 are paid as or on account of, or
are taken into account as tax or other amount payable or
remittable under Part IX of the Act; and
(b)
to amounts that, on or before the last day of that month, were
paid as or on account of, or were taken into account as tax or
other amount payable or remittable under that part, other than
amounts that are claimed in an application under section 261 of
the Act filed on or before June 30, 1998.[4]
Appellants' Position
[6]
The Appellants rely on the decision in Taylor and Redmond v.
The Queen[5] in
which Garon C.J.T.C.C., in identical circumstances, held that the
Appellants' acquisition of their respective residential units
was exempt from tax under Part IX of the Act and that
accordingly, the Minister's assessment to deny them a rebate
of taxes paid in error was vacated. Since this decision was
handed down on July 27, 1998 the Appellants contend that their
right to file a General Application for Rebate was postponed
effective as of that date. In support of this position, it was
submitted that the appropriate interpretation of subsection
261(1) can be ascertained by reading subsections (1) and (3)
together and utilizing subsection (1) in determining what was
meant by the phrase "within two years after the day the
amount was paid or remitted by the person". It was further
submitted that it is necessary to import into the meaning of
subsection (3) the concept of "was not payable or remittable
by the person" from subsection (1). When read in this
fashion and accepting the fact that the Appellants did not learn
that the amount in issue "was not payable" by them
until such time as the Taylor and Redmond decision was
handed down, at that point i.e. July 27, 1998, if the
statutory limitation did in fact apply, they had two years within
which to make their application. The Appellants contend that
interpreting the words referred to in this fashion does not
violate the plain meaning and intent of the statute but
interprets the law in a creative fashion in order to enable the
Court to interpret the relevant sections in a manner which
provides relief for the Appellants.
[7]
In support of this approach to the interpretation of taxing
statutes, reference was made to the decision in Smith Drugs
Ltd. v. M.N.R.[6] wherein Reed J. stated:
With respect to the statements in Fries v. M.N.R., (1990)
114 N.R. 150; 90 DTC 6662 (S.C.C.) and Johns-Manville Canada
Inc. v. M.N.R., (1985) 60 N.R. 244; 85 DTC 5373 (S.C.C.)
which indicate that in cases of uncertainty the taxpayer must be
given the benefit of the doubt, I do not interpret those comments
as in any way resiling from the principle set out in
Stubart. In my view, those cases merely indicate that if
after one has read the relevant statutory provisions of an
Act and read them in light of the purpose and object of
the statute, there is still doubt as to which alternative
interpretation was intended, then, that doubt should be resolved
in favour of the taxpayer, regardless of whether the provision in
question is a charging section or an exemption or deduction
provision.
[8]
These Appellants also adopt the supplementary submissions filed
in May v. The Queen, supra. In that appeal, it was argued
that a reasonable interpretation of subsection 261(3) of the
Act suggests that a person subject to the provisions of
the Act is, in the usual case, aware of a sale of a
taxable supply that did not go through, remained unpaid or was
consumed outside of Canada. In such circumstances, GST would not
be payable and the person would apply for a rebate of GST
remitted on the sale within the limitation period. On the other
hand, a person would not normally know that a rebate of an exempt
supply collected in error by Revenue Canada is possible until a
Court determines that the supply is exempt. In the case of these
Appellants, the determination that the supply of their leasehold
interest was an exempt supply was not made until the Taylor
and Redmond decision which was handed down after the
limitation period had expired. Relying on a recent decision of
the British Columbia Court of Appeal (BCCA), Hansen v. The
Queen,[7] it
was argued that subsection 261(3) may be interpreted as a
limitation that is procedural in nature because it determines
that a person make the application for a rebate when the person
becomes aware of circumstances in which the GST would not be
payable. In Hansen, the BCCA held that a limitation that
is procedural in nature can be extended by agreement or estoppel.
Thus, the Appellants say, Revenue Canada by accepting that
purchasers were entitled to rebates but only after the
Taylor decision was handed down, effectively agreed to
extend the commencement of the limitation period to the date of
the decision i.e. July 27, 1998.
[9]
The Appellants also contend that the Minister is estopped from
denying their claim for a rebate by asserting that their
application is statute-barred by reason of being out of
time. They say that if their application is in fact
statute-barred, the failure to file within the requisite
time was the result of representations made by the Minister's
servants and agents prior to the expiration of the limitation
period with respect to their right to a general rebate.
Minister's Position
[10] The
Respondent contends that the Appellants paid the tax before June
30, 1996. Thus, any application for a rebate of tax paid in error
must have been filed by June 30, 1998. Accordingly, the Minister
properly assessed the Appellants by denying the application
because the Appellants did not file their application until
October 1, 1998, three months after the statutory deadline of
June 30, 1998.
Conclusion
The Limitation Period Argument
[11] I have
concluded that the "creative approach" to the
interpretation of subsections 261(1) and (3) of the Act as
proposed by counsel for Vivian M. May, supra, must
be rejected. The intention of Parliament to limit the time period
for the filing of a rebate application has been set out in clear
and unambiguous language. What is being sought by the Appellants
is to have the Court interpret this particular provision to make
it say what they believed would have been said by the legislators
if this particular situation had been before them. When the
meaning is clear, this Court has no jurisdiction to mitigate a
harsh consequence. While this Court may be entitled to construe
the language of an Act of Parliament, it may not distort
it to make it accord with what the Court may think to be
reasonable.[8]
[12] I am also
of the view that the decision in Hansen is distinguishable
both in fact and in law. The issue in that case was whether she
was barred from pursuing a claim for compensation for land taken
for highway purposes by reason of a one-year limitation in
section 25 of the Expropriation Act.[9] The Expropriation Compensation Board
(the Board) held that the Ministry was estopped from relying on
the limitation period. The appeal was from that determination.
The facts in Hansen are that at a meeting between
solicitors in June 1995 the Ministry's negotiator led
Hansen's solicitor to believe that the one-year limitation
period would run from August 8, the possession date, rather than
from July 21, being one year from the date of payment as
stipulated in the relevant provision. MacKenzie J.A. found that
"the representation was unambiguous. It was a representation
of fact. It was intended to be relied upon, and was relied
upon" and held that the Board was correct in its conclusion
that the elements of promissory estoppel were made out. This
decision is of little assistance to the Appellants since the
estoppel as found involved a representation of fact which was
acted on by Hansen to her detriment. That is not the case
in the present appeal where the representations by Gravelle (and
other Revenue Canada officials) were reflective of the
Department's interpretation of the relevant statutory
provisions of the Act.
[13] Relying
specifically on the following comment of MacKenzie J.A. in
Hansen:
Section 25, as well as barring proceedings after the
expiration of one year, deems the owner to have accepted advanced
payment in full settlement, in the absence of a further claim
within time. In my view, that does not extinguish the claim but
simply deems the claim paid. The distinction may be a subtle one,
but I think that the wording of section 25 lays down a limitation
that is procedural in nature which can be extended by agreement
or estoppel.
it was also argued that the limitation in subsection 261(3) of
the Act is procedural in nature and can be extended by
agreement or estoppel. I am unable to agree. First the Appellants
have not made out a case for estoppel. Second, the limitation
period set out in subsection 261(3) of the Act is
substantive in nature and not merely procedural and cannot be
extended. It provides that "a rebate ... shall not be
paid ... unless the person files an application for the
rebate within two years ... ". As counsel for the
Respondent observed, this provision clearly extinguishes all
rights to the rebate. Furthermore, there is no suggestion the
Appellants were incorrectly informed by any Revenue Canada
official of the limitation period for filing a rebate
application. Thus it is difficult to find any basis for the
submission made that Revenue Canada "effectively agreed to
extend the limitation until after the Court decision" in
Taylor and Redmond. Furthermore, even if the Appellants
had been able to establish that Revenue Canada entered into some
form of agreement with them, it would in effect be an agreement
to assess tax otherwise than in accordance with the law and would
be an illegal agreement.[10]
[14] To the
foregoing, I must add that there is no provision in the
Act granting authority to the Minister or providing the
Federal Court or this Court with jurisdiction to waive, extend or
alter the statutory time periods specified in a subsection such
as 261(3).[11]
Estoppel argument
[15] There is
no evidence that any officer or agent of Revenue Canada provided
the Appellants with erroneous information with respect to their
right to a General Rebate. However, by the latter part of 1995,
it was common knowledge amongst all of the people who had
purchased the strata units in issue that Revenue Canada's
position was that they were not entitled to the rebate.
Furthermore, although there is no direct evidence on point, it is
reasonable to infer that the Appellants were aware of this
position and believed that implicit in Revenue Canada's
position was that they should not make an application because it
would not be successful. It is also a fair inference that, like
many others, they acted on it and concluded that making an
application would be a waste of time. Thus, relying on the
correctness of the expressed Revenue Canada position, they failed
to submit their application within the time period
prescribed.
[16] Although
it is clear that the Appellants acted to their detriment as a
result of the representations made by Revenue Canada employees as
to the relevant provisions of the Act, they cannot
succeed. Issue estoppel has been considered in a number of cases
and the principle which can be taken therefrom is that no
representation involving an interpretation of law by a servant or
officer of the Crown can bind it. In The Minister of National
Revenue v. Inland Industries Limited,[12] the Supreme Court of Canada
considered certain sections of the Income Tax Act
respecting the deductibility of past service contributions to a
pension plan initially accepted by the Department of National
Revenue for registration but with respect of which deductions
were later refused. Pigeon J. speaking for the Court effectively
disposed of any question of an estoppel by stating:
... However, it seems clear to me that the Minister
cannot be bound by an approval given when the conditions
prescribed by the law were not met.
This principle was applied in Stickel v. M.N.R.[13] by Cattanach J.
who stated:
In short, estoppel is subject to the one general rule that it
cannot override the law of the land.
[17] The
rationale for the principle expressed in these cases was
succinctly summarized by Bowman J. in Goldstein v. The
Queen:[14]
It is sometimes said that estoppel does not lie against the
Crown. The statement is not accurate and seems to stem from a
misapplication of the term estoppel. The principle of estoppel
binds the Crown, as do other principles of law. Estoppel in
pais, as it applies to the Crown, involves representations of
fact made by officials of the Crown and relied and acted on by
the subject to his or her detriment. The doctrine has no
application where a particular interpretation of a statute has
been communicated to a subject by an official of the government,
relied upon by that subject to his or her detriment and then
withdrawn or changed by the government. In such a case a taxpayer
sometimes seeks to invoke the doctrine of estoppel. It is
inappropriate to do so not because such representations give rise
to an estoppel that does not bind the Crown, but rather, because
no estoppel can arise where such representations are not in
accordance with the law. Although estoppel is now a principle of
substantive law it had its origins in the law of evidence and as
such relates to representations of fact. It has no role to play
where questions of interpretation of the law are involved,
because estoppels cannot override the law.
[18] The
question before me is whether the representations made by
officials of Revenue Canada to various strata unit owners with
respect to the taxability of the supply of their units were
representations of fact or law. These representations were in
essence that the acquisition of the strata units was considered
to be a sale and purchase and did not constitute an exempt supply
and as such was properly subject to the 7% GST. In my view, these
representations were not statements of fact but rather were an
opinion as to the appropriate interpretation of the relevant
statutory provisions of the Act. In such circumstances, it
is not open to the Appellants to set up estoppel to preclude the
Minister from relying on the provisions of subsection 261(3) of
the Act to deny their claim for a rebate.
[19] Several
other grounds were pleaded by the Appellants including unjust
enrichment and negligence by and on the part of the Minister and,
relying on the provisions of the Limitation Act of British
Columbia, asserting that their claim was not statute-barred.
These grounds were not pursued.
[20] On August
23, 2000, judgments in Melton v. The Queen and Setton
v. The Queen[15] were rendered. These cases involved issues
identical to those in the Cairns appeal. In both Melton
and Setton, the Court relying on subsection 43(c)
of the Interpretation Act[16] and the Ontario Court of Appeal's
interpretation of a similar section of the Ontario
Interpretation Act in the case of Re Falconbridge
Nickel Mines Ltd. v. Minister of Revenue for Ontario,[17] the Court concluded
that:
... The mere fact that the Appellants had purchased their
condominium units during the time former subsection 261(3) of the
Act was enforced and had erroneously overpaid GST,
entitled them to a right to claim refunds within the four-year
period. The Minister had a duty to refund those amounts even if
the application was considered late pursuant to the amended
subsection 261(3). The Appellants had an accrued right or an
accruing right to the monies held by the Minister until the
four-year period expired.
Parliament has not specifically eliminated the accrued right
of taxpayers who fell within the four-year limitation period of
the former subsection 261(3) of the Act. Immediately after
the amendment came into force each of the Appellants still
possessed an accrued right to file the application for the GST
rebate and to receive the refund. Their right to a refund would
have expired at the end of the four-year period.
Since this issue had not been raised in the course of the
present appeal, both parties were permitted to present further
submissions. The Appellants made no further submissions and are
content to rely on the decision in Melton and
Setton. The Respondent's position is that Parliament
explicitly expressed "a contrary intention" to the
operation of subsection 43(c) of the Interpretation
Act through the amending legislation, i.e. subsection 261(3)
of the Act.
[21] More
specifically, counsel for the Respondent contends that
subsection 261(3) was amended by S.C. 1997, c. 10, s. 71
(the "Amending Statute"). This statute implemented
measures proposed in a Notice of Ways and Means Motion tabled on
April 23, 1996. Subsection 71(1) of the Amending Statute had the
effect of reducing the time period within which one must apply
for a rebate of GST paid in error from four years to two years.
Subsection 71(2) dealt with the application of this amendment.
That provision reads as follows:
71(2) Subsection (1)
applies
to amounts that, after June 1996, are paid as or on account
of, or are taken into account as, tax or other amount payable or
remittable under Part IC of the Act; and
(b)
to amounts that, on or before the last day of that month, were
paid as or on account of, or were taken into account as, tax or
other amount payable or remittable under that Part, other than
amounts that are claimed in an application under section 261 of
the Act filed on or before June 30, 1998.
The Respondent argues that Parliament provided a complete code
for the enactment of the amendment through paragraphs
71(2)(a) and (b). These two paragraphs cover all
possible time periods in which a taxpayer may have paid amounts
as GST in error. Paragraph (a) provides that the Amending
Statute applies where amounts are mistakenly collected as GST
after June 30, 1996. Paragraph (b) addressed the
application of the amendment to amounts that are mistakenly
collected as GST before the end of June 1996. Thus, the
Respondent argues the plain language of paragraph (b)
makes it clear that, under certain circumstances, the amendment
is indeed to apply to amounts paid before the end of June 1996.
Specifically, the amendment is said to apply to these amounts
unless an application for rebate is filed before the end of June
1998. Parliament has expressed an intent to have the amendment
apply to certain amounts even if those amounts were paid prior to
the announcement of the pending amendment as in the case of the
Appellants. It is therefore submitted that Parliament has made an
explicit choice to extinguish any accrued rights which may have
existed under the previous wording of subsection 261(3).
[22] The
Respondent further argued that the fact Parliament has explicitly
set out how each and every transaction involving GST paid in
error is to be handled in light of the amendment, whether the
payment was made before or after June 30, 1996, leaves no
room for operation of paragraph 43(c) of the
Interpretation Act. As Parliament has expressed an intent
contrary to that of paragraph 43(c), the Respondent
submits that subsection 3(1) operates to exclude the amendment
from the effects of paragraph 43(c). It is further
submitted by the Respondent that to give effect to paragraph
43(c) would be contrary to the express intent of
Parliament and therefore contrary to subsection 3(1) of the
Interpretation Act.
Analysis
[23] The
interaction of paragraph 43(c) and subsection 3(1) of the
Interpretation Act were considered in the case of Esso
Resources Canada Limited v. The Queen.[18] In that case, federal legislation
taxing natural gas and gas liquids allowed for a refund on the
tax paid in certain circumstances. The taxpayer purchased
quantities of natural gas liquids and used it for a permissible
purpose during the period May 24, 1985 to December 31, 1985.
Amending legislation repealed the excise tax on natural gas
liquids as of March 4, 1986. On December 1, 1986, the
taxpayer applied for a refund of the tax which had been paid
pursuant to the Act. The Minister rejected the application
arguing that the relevant sections of the Excise Tax Act
had been repealed. The appeal of the taxpayer was allowed. Reed
J. found that the taxpayer had made an overpayment by virtue of
the fact the tax was paid on a tax-exempt commodity. After
concluding that the Plaintiff in that case had a right accrued or
accruing to the monies held by the Defendant, Reed J. observed at
pages 6476-77:
A more difficult problem, however, is the argument that
Parliament intentionally wiped out that accrued right by enacting
the March 4, 1986 legislation. This argument is based on the fact
that Parliament repealed not only the changing sections of Part V
but also the refund provisions found in paragraph
68(1)(g). While section 43(c) of the
Interpretation Act provides that repealing legislation
does not affect accrued or accruing rights, that provision only
operates where a contrary intention does not appear in the
statute (see subsection 3(1) of that Act). Also, even
if the Members of Parliament and the government did not intend,
in a subjective sense, to make the gas in question taxable, if
the express words of the statute so provide (even though those
words were enacted through inadvertence) then those words must be
given effect. If there is an express repeal of the right which
had accrued to the plaintiff, then it must be left to Parliament
to enact legislation to correct the error if it was his to do
so. I would note that I have been given no rational
explanation as to why Parliament, in repealing the Natural Gas
and Gas Liquids Tax, might intend to turn gas which had
previously been tax exempt into a taxed commodity.
There is no express repeal of the plaintiff's accrued
right, in the sense of a provision stating "after June 1,
1985 no refunds of tax collected . . . will be payable". Can
one say that such repeal occurred, however, as a matter of
necessary implication? I do not think that any conclusion in
this regard can be drawn from the fact that the amendment of
March 4, 1986 was made retroactive to June 1, 1985. I find
nothing in that retroactivity which, by itself, would lead
necessarily to the conclusion that accrued rights existing on
March 4, 1986 were intended to be revoked. This in part
arises from the fact that the tax-exempt status under the terms
of the legislation related back to the date of the imposition of
the tax. Also, as of March 4, 1986, everything had been done by
the plaintiff (except for the filing of an application) to
entitle it to a refund and there was no express repeal of that
right. The argument that Parliament intended as a matter of
necessary implication to repeal the plaintiff's right is
based solely on the fact that the authority in paragraph
68(1)(g) to make a refund in the case of Part V taxes was
repealed. I am not willing to conclude, however, that the repeal
of paragraph 68(1)(g) indicates that Parliament intended,
as a matter of necessary implication, to repeal the
plaintiff's accrued rights. At most it may have inadvertently
repealed the refund mechanism and thereby made the right
unenforceable, although I do not think this is the case.
[24] I am
satisfied that contrary to the situation in Esso Resources
such a provision does exist in the present appeal. Subsection
71(1) of the Amending Statute amends subsection 261(3) of the
Act to read: "a rebate ... shall not be paid
... unless the person files an application for the rebate
within two years ...". Paragraph 71(2)(b)
goes on to provide that the amendment to subsection 261(3)
of the Act applies to situations where GST was paid in
error prior to the end of June 1996 and no application was filed
by the end of June 1998. These provisions, in my view, read
together constitute in clear and unambiguous terms the express
"contrary intention" that was found lacking in Esso
Resources.
[25] The
decision in Falconbridge Nickel Mines is distinguishable
since the Ontario Court of Appeal made no reference to any
statutory provisions which in any sense could be considered to be
as the expression of a contrary intent by the provincial
legislature. As well, the Ontario Court of Appeal spoke of the
facts in Falconbridge Nickel Mines as being "unusual
circumstances", recognizing that prior to the amendment no
limitation period whatsoever existed in respect of the
application for rebate in question. That Court also recognized
that the amendment allowed for no transitionary period after the
amendment and thus, if a taxpayer was beyond the limitation
period at the time the amendment was brought into force, then it
immediately lost all ability to apply for a rebate. In those
circumstances, the Court found that a right had accrued to make
the application. This situation as well is distinguishable since
the amendment of subsection 261(3) did nothing more than shorten
an existing limitation period. Furthermore, the amendment statute
did in fact provide for a period of transition in that a taxpayer
was entitled to rely upon the previous four-year time limit as
long as the application was submitted by the end of June 1998.
Thus, if at the time of the amendment a person was beyond the two
years but was within the four years of the date GST was paid in
error, that person would still have up to two years within which
the application should be submitted. This not only distinguishes
the situation in Falconbridge Nickel Mines but is also
evidence of the fact that Parliament structured the amendment in
issue in a manner intended to address all possible factual
scenarios and leave no room for the continuation of accrued
rights. Parliament is not to be presumed to enact legislation
without force and effect.[19] The existence of an accrued right to the
four-year time limit cannot be reconciled with the wording of
paragraph 71(2)(b) of the amending statute. Accordingly,
in circumstances where no section 261 application for rebate had
been filed prior to the end of June 1998, as is the case in the
present appeal, the amended two-year time limit must be applied.
The appeal is dismissed.
Signed at Winnipeg, Manitoba, this 10th day of April,
2001.
"A.A. Sarchuk"
J.T.C.C.
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