Date: 20000822
Docket: 2000-645-GST-I
BETWEEN:
VIVIAN M. MAY,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
Sarchuk, J.T.C.C.
[1] This is an appeal by Vivian M. May from an assessment made
by the Minister of National Revenue on April 30, 1999, denying
her application for rebate of goods and services tax (GST).
[2] The parties filed an Agreed Statement of Facts[1] which states:
1. Mrs. Vivian May (the "Appellant") entered an
agreement with Gateway Pacific Construction Ltd. (the
"vendor") on April 2, 1994 (completion date: June 16,
1994) to acquire as a personal residence an interest in a
leasehold condominium described as the WestRoyal Complex, Unit
3A-328 Taylor Way, West Vancouver, British Columbia. The
leasehold condominium is legally described as Strata Lot 112,
District Lot 1039, Leasehold Strata Plan LMS445. A copy of the
Offer to Purchase and Agreement for Sale is attached as Tab
1.
2. The Appellant's leasehold condominium was one unit of a
two-phase development of approximately 180 units developed by the
vendor on land leased from the District of West Vancouver, The
Ground Lease for the development was converted by the vendor into
individual strata lot leases as a result of the deposit by the
vendor of Phase 1 and 2 leasehold strata plan in the
Vancouver/New Westminster Land Title Office in accordance with
the provisions of the Condominium Act and the Land
Titles Act. Attached as Tab 2 is a copy of the Ground Lease
and the Acknowledgement of Receipt by Assignee of the Assignment
of the Lease (No. ST921005) granted by the Vendor to the
Appellant.
3. The Appellant paid $23,450 as GST to the Vendor, as agent
of Her Majesty in Right of Canada, to complete the purchase. This
amount was 7% of the $335,000 purchase price of the leasehold
condominium. Attached as Tab 3 is a copy of the Appellant's
statement of adjustments.
4. The Appellant received a GST New Housing Rebate of
$8,453.02 (including $11.02 interest) in September 1994. A copy
of the Appellant's deposit slip for this amount is attached
as Tab 4.
5. Since January of 1995 Revenue Canada has been aware,
through numerous correspondence by WestRoyal unit owners and the
WestRoyal GST sub-committee, that the payment of GST on the
exempt supply of leasehold condominium units at the WestRoyal
Complex, such as the Appellant's, was in dispute. Copies of
notices and Minutes of Strata Council meetings in the
Appellant's possession are attached as Tab 5.
6. The Federal Tax Court, on July 27, 1998 decided the case of
Taylor v. The Queen, 98 G.T.C. 2206 (T.C.C.). This
decision was rendered more than 4 years after the Appellant
completed the purchase of her leasehold condominium on June 16,
1994. The Taylor decision held that the assignment of the
leasehold interest in the lands and their respective residential
units, such as the Appellant's, are exempt from tax under
Part IX of the Excise Tax Act. A copy of the Taylor
decision is attached as Tab 6.
7. The Appellant, through her representative, wrote to Revenue
Canada on August 28, 1998 regarding the possibility of a refund
for the GST balance owing $23,450 - $8,422 = $15,008) on the
exempt supply of her leasehold condominium. A copy of the letter
is attached as Tab 7.
8. Mr. Melvin Bellefontaine from Revenue Canada called the
office of the Appellant's representative on October 27, 1998
to request a consent letter authorizing the release of
information to the Appellant's representatives. A note to the
file is attached as Tab 8.
9. The consent letter was sent to Revenue Canada on November
14, 1998. A copy of the consent letter is attached as Tab 9.
10. The Appellant's representative spoke to Mr.
Bellefontaine on December 11, 1998 regarding the application for
a General Rebate sent by Revenue Canada. A copy of the note to
the file is attached as Tab 10.
11. The General Application for Rebate of GST was sent to
Revenue Canada on December 30, 1998. A copy of the letter
attached to the General Application for Rebate is attached as Tab
11.
12. The General Application for Rebate was denied by Notice of
Assessment No. 990131122129P0001 dated April 30, 1999. A copy of
a letter denying the General Application for Rebate is attached
as Tab 12.
13. The Notice of Objection regarding the Assessment was filed
with the Minister on June 18, 1999. A copy of the Notice of
Objection and the attached Addendum is attached as Tab 13.
14. By Notice of Decision dated November 15, 1999, the
Minister disallowed the objection and confirmed the Assessment on
the ground that the General Application for Rebate was not filed
within the time limit set out in section 261(3) of the Excise
Tax Act. A copy of the Notice of Decision is attached at Tab
14.
Legislative Scheme
[3] The relevant provisions of the Act in effect on
December 30, 1998 when the Appellant filed her General
Application for Rebate 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.
[2] [3]
Appellant's position
[4] The Appellant relies on the decision in Taylor and
Redmond v. The Queen[4] 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 Appellant contends that her right to file a General
Application for Rebate was postponed effective as of that date.
In support of this position, counsel for the Appellant 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". He contends 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 Appellant did not learn that the amount in issue
"was not payable" by her 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, she had two years within which to make her application.
Counsel submitted 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 Appellant.
[5] 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.[5] 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.
[6] Subsequent to the hearing of the appeal, Mr. Harkness
filed supplementary submissions in which he 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 this
Appellant, the determination that the supply of her 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,[6]
counsel 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, counsel says, 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.
[7] In the alternative, the Appellant contends that the
Minister is estopped from denying her claim for a rebate by
asserting that her application is statute-barred by reason
of being out of time. She says that if her application is in fact
statute-barred, her 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 her right to a general rebate.
Conclusion
Estoppel argument
[8] The Appellant was unable to identify a specific incident
where an officer or agent of Revenue Canada provided her with
erroneous information with respect to her 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
Appellant was aware of this position and believed that implicit
in Revenue Canada's position was that she should not make an
application because it would not be successful. It is also a fair
inference that, like many others, she 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, she failed to submit her application within the time
period prescribed.
[9] Although it is clear that the Appellant acted to her
detriment as a result of the representations made by Revenue
Canada employees as to the relevant provisions of the Act,
she 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,[7] 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.[8] by Cattanach J. who
stated:
In short, estoppel is subject to the one general rule that it
cannot override the law of the land.
[10] The rationale for the principle expressed in these cases
was succinctly summarized by Bowman J. in Goldstein v. The
Queen:[9]
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.
[11] 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 Appellant to set up estoppel to preclude the
Minister from relying on the provisions of subsection 261(3) of
the Act to deny her claim for a rebate.
The Limitation Period Argument
[12] I have concluded that the Appellant's "creative
approach" to the interpretation of subsections 261(1) and
(3) of the Act 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 counsel for the Appellant seeks is to have the Court
interpret this particular provision to make it say what she
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.[10]
[13] 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.[11] 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 Appellant 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.
[14] Counsel for the Appellant, 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.
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 Appellant
has 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
Appellant was 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 by
Mr. Harkness that Revenue Canada "effectively agreed to
extend the limitation until after the Court decision" in
Taylor and Redmond. Furthermore, even if the Appellant had
been able to establish that Revenue Canada entered into some form
of agreement with her, it would in effect be an agreement to
assess tax otherwise than in accordance with the law and would be
an illegal agreement.[12]
[15] 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).[13]
[16] Several other grounds were pleaded by the Appellant
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 her claim was not
statute-barred. Counsel for the Appellant advised that these
grounds were not being pursued.
[17] Accordingly, for the above reasons, the appeal is
dismissed.
Signed at Ottawa, Canada, this 22nd day of August, 2000.
"A.A. Sarchuk"
J.T.C.C.
Email this Content