Tax Court of Canada Judgments

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.

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