Tax Court of Canada Judgments

Date: 20000822

Docket: 2000-604-GST-I

BETWEEN:

BRAXTON M. ALFRED & DIANE L. ALFRED,

Appellants,

and

HER MAJESTY THE QUEEN,

Respondent.

Reasons for Judgment

Sarchuk J.T.C.C.

[1] This is an appeal by Braxton and Diane Alfred from an assessment made by the Minister of National Revenue (the Minister) on April 30, 1999 denying their application for a rebate of goods and services tax (GST).

[2] There is general agreement regarding the following facts. A developer leased a large area of undeveloped property from the University of British Columbia (the University) and improved the property with residential buildings. In August 1992, the Appellants purchased, as a personal residence, an interest in a leasehold condominium at 304-5880 Hampton Place. This interest was acquired by way of assignment of one of the stratified leases converted from the developer's lease with the University when the Appellants acquired the residential strata unit from the developer. The purchase price was $287,000. In addition, upon closing on August 24, 1992, the Appellants were required to and did pay GST to the vendor in the amount of $20,090. A General Application for Rebate of the full amount of GST paid was filed by the Appellants and received by the Minister on February 12, 1999.[1] On April 30, 1999, the Minister assessed to deny the rebate on the basis that "the rebate claim is statute-barred by the time limits imposed by subsection 261(3) of the Excise Tax Act".[2]

Appellant's Evidence

[3] Diane Alfred testified that in the years following their acquisition of the property there was considerable confusion regarding the payment of GST by purchasers of the residential strata units. On a personal basis, she first became aware of the issue in question through an article published in the "Your Taxes" column of the Vancouver Sun in July 1995. The column specifically referred to the fact that several residents in the same complex had contacted Revenue Canada and had received inconsistent advice regarding their respective entitlements to a rebate. The columnist had made inquiries and reported that "according to Revenue Canada in Ottawa, this matter is currently under review. They expect to have a position within the next couple of weeks". Approximately six months later when no decision was forthcoming, Diane Alfred wrote to the Minister, David Anderson,[3] enclosing a copy of the article and seeking information as to when the decision would be made. On March 18, 1996, Pierre Gravelle, Q.C., Deputy Minister, Revenue Canada, responded stating, inter alia, that "Following a thorough review of the Condominium Act and the GST legislation, Revenue Canada has concluded that the transaction in fact represents a sale and, as such, is properly subject to the 7% GST".[4] Diane Alfred said that the Appellants had no basis on which to judge the legal reasoning in the letter from the Deputy Minister. She also observed that Gravelle was a Q.C. and understood that he was a lawyer and on that basis simply trusted the advice that "OK, it's payable, case closed and I didn't pursue it further".[5]

[4] The Appellants heard nothing further regarding the rebate issue until Judy and Jim Taylor sent a letter to the chairmen of the various strata councils informing them that they had been successful in their appeal of an assessment denying their claim for a rebate.[6] Further information was obtained by a member of the Appellants' strata council with respect to that decision and as a result thereof, the Appellants filed their General Application for Rebate which, as previously noted, was denied by the Minister.

[5] Raymond Takyan Ng (Ng) purchased two units in Hampton Place in 1993, one as his primary residence and the other as a rental unit. On the advice of his solicitor he contacted Revenue Canada to determine whether GST had to be paid and was advised that 7% GST was to be paid on the rental property but would only qualify for a 2.5% rebate with respect to the residence.[7] In 1995, he attended a meeting at which an accountant addressed a number of the strata unit residents with regard to the GST issue and offered his assistance for the purpose of filing rebate applications. Uncertain as to whether he should retain the accountant, Ng again approached Revenue Canada for information and specifically asked whether it would be "meaningful for me to file this claim". He said the official produced "some documentation that, in fact, everybody needs to pay GST" and recalled that "the official was very confident that I would just be wasting my money" retaining someone to file his application. Acting on these statements, he decided not to proceed with his application. Ng noted that the rebate issue was a recurring topic of conversation amongst the residents but conceded that he had no specific recollection of informing the Appellants regarding his experiences with Revenue Canada or with respect to the advice he received from its employees.

[6] Both Alfred and Ng testified that in the course of their respective dealings with officials of Revenue Canada, there was never any explanation or comment regarding their rights with respect to the time within which the application was to be made nor any reference to limitation periods.

The Legislative Scheme

[7] The relevant provisions of the Act in effect on January 29, 1999 when the Appellants filed their 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. [8] [9]

Appellants' position

[8] The Appellants 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, their failure to file within the requisite time was the result of representations made by the Minister's servants and agents. In particular, the Appellants refer to what they say was the negligent advice provided by Deputy Minister Gravelle prior to the expiration of the limitation period that the purchase of the strata units in question was subject to GST and on which they relied. The Appellants say that implicit in that representation was that they should not make an application for a rebate because it would not be successful. Since this advice was acted upon by the Appellants to their detriment, they take the position that the Minister is precluded from relying on the limitation provisions set out in subsection 261(3) of the Act to deny their claim.

[9] In the alternative, the Appellants rely on the decision in Taylor and Redmond v. The Queen[10] in which Garon C.J.T.C.C., in identical circumstances, held that those Appellants' acquisition of their respective residential units was exempt from tax under Part IX of the Act and 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, counsel for the Appellants 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 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. 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 Appellants.[11]

[10] In support of this proposed approach to the interpretation of a taxing statute, reference was made by counsel to the decision of Madame Justice Reed in Smith Drugs Ltd. v. M.N.R.[12] wherein she 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.

[11] 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 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,[13] 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.

Conclusion

The estoppel argument

[12] The evidence establishes that the Appellants became aware of their possible entitlement to a rebate at the very latest in July 1995. As well, in that same time frame, it was generally known that Revenue Canada had both provided an advance ruling in 1994 from which it could be gathered that purchasers such as the Appellants would be entitled to a rebate but also had given contradictory information to a number of purchasers to the effect that they would not be entitled to rebates. Revenue Canada had also indicated that it was considering its position as to whether the acquisition of these units was exempt from tax. In January 1996, Diane Alfred, following up on her earlier letter, pressed the Minister for a decision and received a response from his Deputy in March 1996. The considered opinion given therein was that based on the provisions of the relevant legislation the transaction was subject to GST. I am satisfied that the Appellants' acceptance of this representation directly led to the abandonment of their efforts to claim a rebate at a point of time when they still were within the statutory limitation period.

[13] Although it is clear that the Appellants acted to their detriment as a result of the advice received, they cannot succeed on this ground. 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,[14] 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.[15] by Cattanach J. who stated:

In short, estoppel is subject to the one general rule that it cannot override the law of the land.

[14] The rationale for the principle expressed in these cases was succinctly summarized by Bowman J. in Goldstein v. The Queen:[16]

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.

[15] The question before me is whether the representations made by an official of Revenue Canada to these Appellants were representations of fact or law. In his letter of March 18, 1996,[17] Gravelle stated:

The GST legislation normally treats the sale of condominium units as subject to the seven per cent GST in situations where the unit is newly constructed and previously unoccupied. The rental of a condominium unit, however, is generally exempt from the GST. The point at issue in this particular case is whether the transaction represents a sale or a lease. Following a thorough review of the Condominium Act and the GST legislation, Revenue Canada has concluded that the transaction in fact represents a sale and, as such, is properly subject to the seven per cent GST. ...

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.

The Limitation Period Argument

[16] I have concluded that the Appellants' "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 Appellants seeks 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.[18]

[17] 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.[19] 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.

[18] Counsel for the Appellants, 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 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 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 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.[20]

[19] 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).[21]

[20] 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. Counsel for the Appellants advised that these grounds were not being pursued.

[21] 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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