Date: 20000609
Docket: A-306-99
CORAM: LÉTOURNEAU J.A.
ROBERTSON J.A.
SEXTON J.A.
BETWEEN:
HER MAJESTY THE QUEEN
Applicant
AND:
ROBERT B. SNEYD
Respondent
APPLICATION UNDER s. 28 of the Federal Court Act R.S.C. 1985, c. F-7 as amended.
Heard at Ottawa, Ontario, Wednesday, June 7, 2000
Judgment delivered at Ottawa, Ontario, Friday, June 9, 2000
REASONS FOR JUDGMENT BY: LÉTOURNEAU J.A.
CONCURRED IN BY: ROBERTSON J.A.
SEXTON J.A.
Date: 20000609
Docket: A-306-99
CORAM: LÉTOURNEAU J.A.
ROBERTSON J.A.
SEXTON J.A.
BETWEEN:
HER MAJESTY THE QUEEN
Applicant
AND:
ROBERT B. SNEYD
Respondent
APPLICATION UNDER s. 28 of the Federal Court Act R.S.C. 1985, c. F-7 as amended.
REASONS FOR JUDGMENT
LÉTOURNEAU J.A.
This is an application for judicial review of a decision of the Tax Court of Canada rendered on April 7, 1999, by which the learned Tax Court judge (judge) allowed the respondent"s appeal from an assessment made by the Minister of National Revenue (Minister) under the Excise Tax Act , R.S.C., 1985, c. E-15 (Act). The Minister denied the respondent"s claim made under subsection 256(2) of the Act for a rebate of the Goods and Services Tax (GST) paid in respect of renovations and the construction of a Rental Unit added to his home.
We are called upon to interpret a model of ambiguity created by a maze of definitions. Fortunately, the principal issue in these proceedings is limited to determining whether a single apartment within a larger dwelling constitutes a "single unit residential complex" for the purposes of section 256 of the Act. The relevant parts of that section read:
256. (1) In this section,
...
"single unit residential complex" includes a multiple unit residential complex that does not contain more than two residential units.
256. (1) Les définitions qui suivent s"appliquent au présent article.
"_immeuble d"habitation à logement unique_" Est assimilé à l"immeuble d"habitation à logement unique l"immeuble d"habitation à logements multiples de deux habitations.
256. (2) Where
(a) a particular individual constructs or substantially renovates, or engages another person to construct or substantially renovate for the particular individual, a residential complex that is a single unit residential complex or a residential condominium unit for use as the primary place of residence of the particular individual or a relation of the particular individual,
256. (2) Le ministre verse un remboursement à un particulier dans le cas où, à la fois_:
a) le particulier, lui-même ou par un intermédiaire, construit un immeuble d"habitation " immeuble d"habitation à logement unique ou logement en copropriété " ou y fait des rénovations majeures, pour qu"il lui serve de résidence habituelle ou serve ainsi à son proche;
(b) the fair market value of the complex, at the time the construction or substantial renovation thereof is substantially completed, is less than $450,000,
b) la juste valeur marchande de l"immeuble, au moment où les travaux sont achevés en grande partie, est inférieure à 450 000_$;
(c) the particular individual has paid tax in respect of the supply by way of sale to the individual of the land that forms part of the complex or an interest therein or in respect of the supply to, or importation by, the individual of any improvement thereto or, ...
c) le particulier a payé la taxe prévue à la section II relativement à la fourniture par vente, effectuée à son profit, du fonds qui fait partie de l"immeuble ou d"un droit sur ce fonds, ou relativement à la fourniture effectuée à son profit, ou à l"importation par lui, d"améliorations à ce fonds ou, dans le cas d"une maison mobile ou d"une maison flottante, de l"immeuble (le total de cette taxe prévue au paragraphe 165(1) et aux articles 212 et 218 étant appelé "_total de la taxe payée par le particulier_" au présent paragraphe);
(d) either
(i) the first individual to occupy the complex after the construction or substantial renovation is begun is the particular individual or a relation of the particular individual, or ...
d) selon le cas_:
(i) le premier particulier à occuper l"immeuble après le début des travaux est le particulier ou son proche,
[...]
the Minister shall, subject to subsection (3), pay a rebate to the particular individual equal to ...
Le montant remboursable est égal au montant suivant_: [...]
Also relevant to the issue are the following definitions found in subsection 123(1).
"multiple unit residential complex" means a residential complex that contains more than one residential unit, but does not include a condominium complex;
"immeuble d"habitation à logements multiples" Immeuble d"habitation, à l"exclusion d"un immeuble d"habitation en copropriété, qui contient au moins deux habitations.
"residential complex" means
(a) that part of a building in which one or more residential units are located, together with (i) ... (ii) ...
"immeuble d"habitation"
a) La partie constitutive d"un bâtiment qui comporte au moins une habitation, y compris_: (i) [...] (ii) [...];
(b) that part of a building that is
(i) the whole or part of a semi-detached house, rowhouse unit, residential condominium unit or other similar premises that is, or is intended to be, a separate parcel or other division of real property owned, or intended to be owned, apart from any other unit in the building, and
b) la partie d"un bâtiment, y compris la proportion des parties communes et des dépendances du bâtiment, et du fonds sous-jacent ou contigu à celui-ci, qui est attribuable à l"habitation et raisonnablement nécessaire à son usage résidentiel, qui constitue_:
(ii) a residential unit, together with that proportion of any common areas and other appurtenances to the building and the land subjacent or immediately contiguous to the building that is attributable to the unit and that is reasonably necessary for its use and enjoyment as a place of residence for individuals,
(i) d"une part, tout ou partie d"une maison jumelée ou en rangée, d"un logement en copropriété ou d"un local semblable qui est, ou est destinée à être, une parcelle séparée ou une autre division d"immeuble sur lequel il y a, ou il est prévu qu"il y ait, un droit de propriété distinct des droits de propriété des autres parties du bâtiment,
(ii) d"autre part, une habitation;
(c) the whole of a building described in paragraph (a), or the whole of a premises described in subparagraph (b)(i), that is owned by or has been supplied by way of sale to an individual and that is used primarily as a place of residence of the individual, an individual related to the individual or a former spouse of the individual, together with
...
c) la totalité du bâtiment visé à l"alinéa a) ou du local visé au sous-alinéa b )(i), qui est la propriété d"un particulier, ou qui lui a été fourni par vente, et qui sert principalement de résidence au particulier, à son ex-conjoint ou à un particulier lié à ce particulier, y compris_:
(i) dans le cas d"un bâtiment visé à l"alinéa a ), les dépendances, le fonds sous-jacent et la partie du fonds contigu qui sont raisonnablement nécessaires à l"usage du bâtiment,
(ii) dans le cas d"un local visé au sous-alinéa b )(i), la fraction des parties communes et des dépendances du bâtiment, et du fonds sous-jacent ou contigu à celui-ci [...]
"residential unit" means (a) a detached house, semi-detached house, rowhouse unit, condominium unit, mobile home, floating home or apartment, ...
"_habitation_" Maison individuelle, jumelée ou en rangée, unité en copropriété, maison mobile, maison flottante, appartement, [...]
"single unit residential complex" means a residential complex that does not contain more than one residential unit, but does not include a residential condominium unit;
"immeuble d"habitation à logement unique" Immeuble d"habitation, à l"exclusion d"un logement en copropriété, qui contient au plus une habitation.
"substantial renovation" of a residential complex means the renovation or alteration of a building to such an extent that all or substantially all of the building that existed immediately before the renovation or alteration was begun, other than the foundation, external walls, interior supporting walls, floors, roof and staircases, has been removed or replaced where, after completion of the renovation or alteration, the building is, or forms part of, a residential complex;
"rénovations majeures" Fait l"objet de rénovations majeures le bâtiment qui est rénové ou transformé au point où la totalité, ou presque, du bâtiment qui existait immédiatement avant les travaux, exception faite des fondations, des murs extérieurs, des murs intérieurs de soutien, des planchers, du toit et des escaliers, a été enlevée ou remplacée, dans le cas où, après l"achèvement des travaux, le bâtiment constitue un immeuble d"habitation ou fait partie d"un tel immeuble.
Facts and Procedure
The respondent lived with his family in a heritage house. The house, when first built, was designed to hold only one family. Some time after its original construction, an addition was made (the Rental Unit), so that the house was suitable for occupation by two families as to separate dwelling units, each unit having its own entrance, kitchen and bathroom. From time to time, the house had been so used. Immediately prior to 1994, however, the respondent"s family occupied both parts of the building. In 1994, the respondent did work on two parts of the house:
| i. Main structure of the house: Renovations to 50% to 60% of the main structure of the house (i.e., the part of the house that does not include the Rental Unit). |
| ii. Rental Unit. Two kinds of work were done on the Rental Unit: |
| a. renovations: replacement of the plumbing, electrical systems, the built-in fixtures, and the heating and air conditioning systems; rebuilding of entrance, pantry and washroom. |
| b. extension of space: an additional 1,248 square feet were built and added to the Rental Unit"s previous area (1,134 square feet). The additional space included a bedroom, living room, porch, bathroom, hallway and patio doors. |
The Rental Unit continued to form a single residential unit after completion of the two kinds of work. This unit was first occupied by the respondent"s son, thereby satisfying the concluding words of paragraphs 256(2)(a ) and 265(2)(d) of the Act.
The cost of the work done on the Rental Unit amounted to $107,000.00. It is with respect to this amount that the respondent sought a GST rebate.
Decision of the Tax Court of Canada
The judge allowed the appeal from the Minister"s assessment. He was satisfied that, with respect to the Rental Unit, the respondent met the criteria of subsection 256(2): he had effected either a construction or a substantial renovation of a single unit residential complex. He expressed his conclusion in the following terms at paragraph 10 of his decision:
| Having regard to the relevant parts of the definitions of "residential complex", "residential unit", and "single unit residential complex", we discover that the part of a building in which an apartment is located is a residential complex, and that for present purposes it is a single unit residential complex if it does not contain more than two residential units. If the first addition to this building is considered to be a residential unit separate from the main house at the time the renovation began, then it would qualify as a "single unit residential complex", and the work brought about a substantial renovation of it. If it is not considered to be a separate unit at the time the renovation began, then the effect of the work was to create a new "single unit residential complex". In either event, the Appellant comes within the prescription of subsection 256(2), and is entitled to the rebate. |
In coming to that conclusion, the judge ruled that the work done in 1994 did not, however, amount to a substantial renovation of the entire house. No issue is taken with this finding.
Analysis
The applicant complains that the judge erred in law in his interpretation of section 256 of the Act when he concluded that the part of a building in which an apartment, such as the Rental Unit before or after its renovations, is located is a residential complex within the meaning of that section. I believe this complaint is well founded for the following reasons.
First, the term "complex" denotes an aggregate of units. Where a building has more than one residential unit within it, the "residential complex" is the aggregate of the various residential units. In my view, it runs counter to the very meaning of the word "complex" to qualify as a complex each and every residential unit of a "residential complex". The meaning given by the judge to the words "residential complex", whereby any area containing a single apartment constitutes a residential complex, inescapably leads to a proliferation of residential complexes within a single building which has many residential units.
Second, the judge"s interpretation of "residential complex" is not supported by the statutory definition of these words. Indeed, "residential complex" is defined in subsection 123(1) of the Act as "that part of a building in which one or more residential units are located" (my emphasis). The definition does not refer to "a" part of the building, but rather "that" part of the building which contains one or more residential units. This means that if a building has one residential unit, then the relevant residential complex is that part of the building where that one unit is located. Where the building has two residential units, then the "residential complex" is that part of the building where the two units are located.
In my view, the French definition of "residential complex" (immeuble d"habitation) strengthens that interpretation. "Immeuble d"habitation" is defined in paragraph 123(1)(a ) of the Act as "la partie constitutive d"un bâtiment qui comporte au moins une habitation". Again, the French text uses the definite article. Furthermore, the use of the word "constitutive" is indicative of Parliament"s intent. The word "constitutive" has been defined as "Qui constitue l"essentiel de" and "Qui constitue la base, le fondement d"une chose": See Le Petit Robert, Dictionnaire de la langue française; Trésor de la langue française: Dictionnaire de la langue du XIXe et du XXe siècles (1789-1960) , Paris, Éditions du Centre national de la recherche scientifique, 1978. The use of this word with the definite article indicates that "residential complex" is intended to refer to that core part of a building given over or assigned to residential purposes. Had Parliament intended to break up a building into many constitutive parts or a number of such parts, it would have used the words "une partie" or "une partie constitutive", but not "la partie constitutive".
Third, the judge"s interpretation of "residential complex" defeats the overall purpose of the Act as well as that of the GST New Housing Rebate. The Act is a taxing statute whose purpose is to raise government revenues. The GST New Housing Rebate is a limited exception to that purpose. Housed in subsection 256(2) of the Act, its object is to provide a construction and renovation incentive to owners of small dwellings, i.e., dwellings which contain a single residential unit (subsection 123(1)) or no more than two residential units (subsection 256(1)). That the provision is aimed at owners of relatively small buildings is further indicated by the ceiling of $450,000 on the total fair market value of the "residential complex" and by the requirement that the owner or a relative be the first inhabitant of the newly constructed or renovated unit (subsection 256(2)). To interpret "residential complex" within the phrase "single unit residential complex", as the judge did, to include any single apartment in a much larger aggregate of residential units would go against this carefully tailored scheme. Otherwise, construction or substantial renovation to any apartment worth less than $450,000 would qualify for the rebate, even if the building as an aggregate was worth millions of dollars and contained dozens of apartments or residential units. This offends the expanded definition of "single unit residential complex" in subsection 256(1) which, while recognizing the benefit of the tax rebate to a multiple unit residential complex, limits it, however, to a complex that does not contain more than two residential units.
In conclusion, I am of the view that the judge committed an error of law when he concluded that the Rental Unit of the respondent by itself was a "single unit residential complex". The only single unit residential complex was the entire house. In view of the judge"s finding that the entire house did not undergo substantial renovation, it follows that the GST rebate was not available.
For these reasons, the application for judicial review should be allowed, the decision of the Tax Court judge set aside and the matter remitted to the Tax Court of Canada for a redetermination on the basis that the respondent"s appeal from the Minister"s assessment dated June 2, 1997, be dismissed.
In view of subsections 2.2, 18.3001 and 18.3008 of the Tax Court of Canada Act, R.S.C. 1985, c. T-2, the applicant, though successful, should pay to the respondent reasonable and proper costs incurred by him in respect of the application for judicial review.
"Gilles Létourneau"
J.A.
"I agree:
Joseph T. Robertson J.A."
"I agree
J. Edgar Sexton J.A."