Citation: 2014 TCC 34
HER MAJESTY THE QUEEN,
REASONS FOR JUDGMENT
C. Miller J.
In March 2010, Mr. Rochefort
and his wife signed an Agreement of Purchase and Sale to acquire a home to be
constructed as their primary residence. Due to their failure to qualify for a
mortgage, Mr. Rochefort asked his nephew, Mr. Fontaine, to become a co-signor,
which entailed Mr. Fontaine becoming a joint tenant on title with Mr.
Rochefort. Mr. Rochefort applied for the GST/HST New Housing Rebate, and a
rebate of $27,277.29 was credited to the developer, DCR Phoenix Development
Corporation Limited ("DCR"). The Minister of National Revenue (the
"Minister") assessed Mr. Rochefort denying the rebate on the basis
the requirement in subparagraph 254(2)(e) of the Excise Tax Act
(the "Act") had not been met.
Mr. and Mrs. Rochefort,
shortly after their marriage, decided to buy a new home. They considered
several developers but ultimately settled on DCR. Mr. Rochefort had also
gone to the National Bank of Canada to obtain mortgage pre-approval. He and
Mrs. Rochefort signed an Agreement of Purchase and Sale with DCR on March 8,
2010 to build a new home at 1928 Pennyroyal Crescent, Orleans, Ontario, and together they made the $5,000 deposit. They also made the subsequent requisite
deposits. Together they agreed on certain amendments to the Agreement of
Purchase and Sale over the next few months. Mr. Rochefort put his current home
on the market, but it did not sell.
Shortly before the
closing of the purchase and sale in November 2010, Mr. Rochefort was
advised by the National Bank of Canada that, due to his failure to sell his
current property, and given his wife’s poor credit rating at that time, they no
longer qualified for a mortgage. After consulting with their lawyer and being
advised they would have to forfeit over $20,000 in deposits and may be liable
for damages the Rocheforts decided they could not abandon the deal. They had
their mortgage broker find another lender. TD Canada Trust were prepared
to lend the money but required what Mr. Rochefort referred to as a "co-signor".
Mr. Rochefort therefore approached his nephew, Mr. Fontaine, to serve in
Mr. Fontaine testified
that he was prepared to help his uncle out by signing whatever was necessary.
It was evident from Mr. Fontaine’s testimony that he was not entirely clear on
exactly what the lawyer had him sign, though acknowledged his signature on the TD
Canada Trust Commitment for a Fixed Rate Mortgage form, signed November 3,
2010, the day before closing – the day before
Mr. and Mrs. Rocherfort moved into their new home. Mr. Fontaine
also signed a Direction re: Title, as did Mr. and Mrs. Rochefort, authorizing
the lawyers to "engross the deed on transfer" to Mr. Rochefort and
Mr. Fontaine as joint tenants, also signed on November 3, 2010. Title was
transferred to Mr. Rochefort and Mr. Fontaine as joint tenants and the TD
Canada Trust mortgage was registered on title on November 4, 2010. Mr. Rochefort
got the keys on November 4, 2010 and he and Mrs. Rochefort moved into their new
home and have been living there ever since as their primary residence. Mr.
Rochefort has still been unable to sell his former home and continues to rent
Mr. Fontaine testified
that he never paid any part of the mortgage, or any of the property bills. He
and Mr. Rochefort were clear that if the property ever sold Mr. Fontaine was
entitled to nothing, "not a dime", as Mr. Rochefort put it. This was
clearly not an investment for Mr. Fontaine but a family favour to help the
Rocheforts acquire their new home. As Mrs. Rochefort indicated, Mr. Fontaine
simply came in to help them out at the last minute.
Although Mr. Rochefort
could not specifically recall signing the new housing rebate, he did so
sometime in 2010, and DCR was credited with the $27,278. The Respondent has
assessed Mr. Rochefort on the basis he is not entitled to the rebate.
Is Mr. Rochefort
entitled to the GST/HST new housing rebate pursuant to subsection 254(2) of the
The new housing rebate
is found in subsection 254(2) of the Act which reads:
builder of a single unit residential complex or a residential condominium unit
makes a taxable supply by way of sale of the complex or unit to a particular
the time the particular individual becomes liable or assumes liability under an
agreement of purchase and sale of the complex or unit entered into between the
builder and the particular individual, the particular individual is acquiring
the complex or unit for use as the primary place of residence of the particular
individual or a relation of the particular individual,
total (in this subsection referred to as the “total consideration”) of all
amounts, each of which is the consideration payable for the supply to the
particular individual of the complex or unit or for any other taxable supply to
the particular individual of an interest in the complex or unit, is less than
particular individual has paid all of the tax under Division II payable in
respect of the supply of the complex or unit and in respect of any other supply
to the individual of an interest in the complex or unit (the total of which tax
under subsection 165(1) is referred to in this subsection as the “total tax
paid by the particular individual”),
of the complex or unit is transferred to the particular individual after the
construction or substantial renovation thereof is substantially completed,
the construction or substantial renovation is substantially completed and
before possession of the complex or unit is given to the particular individual
under the agreement of purchase and sale of the complex or unit
the case of a single unit residential complex, the complex was not occupied by
any individual as a place of residence or lodging, and
the case of a residential condominium unit, the unit was not occupied by an
individual as a place of residence or lodging unless, throughout the time the
complex or unit was so occupied, it was occupied as a place of residence by an
individual, or a relation of an individual, who was at the time of that
occupancy a purchaser of the unit under an agreement of purchase and sale of
the unit, and
first individual to occupy the complex or unit as a place of residence at any
time after substantial completion of the construction or renovation is
(A) in the
case of a single unit residential complex, the particular individual or a
relation of the particular individual, and
(B) in the
case of a residential condominium unit, an individual, or a relation of an
individual, who was at that time a purchaser of the unit under an agreement of
purchase and sale of the unit, or
particular individual makes an exempt supply by way of sale of the complex or
unit and ownership thereof is transferred to the recipient of the supply before
the complex or unit is occupied by any individual as a place of residence or
the Minister shall, subject to
subsection (3), pay a rebate to the particular individual equal to
the total consideration is not more than $350,000, an amount equal to the
lesser of $6,300 and 36% of the total tax paid by the particular individual,
the total consideration is more than $350,000 but less than $450,000, the
amount determined by the formula
A × [($450,000 - B)/$100,000]
is the lesser of $6,300 and 36% of the
total tax paid by the particular individual, and
is the total consideration.
Section 133 of the Act
describes a taxable supply for these purposes as follows:
133. For the purposes of this
Part, where an agreement is entered into to provide property or a service,
entering into of the agreement shall be deemed to be a supply of the property
or service made at the time the agreement is entered into; and
provision, if any, of property or a service under the agreement shall be deemed
to be part of the supply referred to in paragraph (a) and not a separate
Section 254 of the Act
refers to a "particular individual". Where there is more than one
purchaser, subsection 262(3) of the Act makes it clear that the
particular individual refers to both. That provision reads:
supply of a residential complex or a share of the capital stock of a
cooperative housing corporation is made to two or more individuals, or
or more individuals construct or substantially renovate, or engage another
person to construct or substantially renovate, a residential complex,
the references in sections 254 to 256 to
a particular individual shall be read as references to all of those individuals
as a group, but only one of those individuals may apply for the rebate under
section 254, 254.1, 255 or 256, as the case may be, in respect of the complex
It is clear that the taxable
supply was made to Mr. and Mrs. Rochefort: they signed the Agreement of
Purchase and Sale, and they put down the deposit. Mr. Fontaine did not. No
supply, for purposes of the Act, was made to Mr. Fontaine.
How then does this
legislation apply to Mr. and Mrs. Rochefort? Subparagraph 254(2)(e) of
the Act requires that "ownership" is transferred to the
particular individual, in this case to Mr. & Mrs. Rochefort. The Respondent’s
argument is simply that ownership was not transferred to Mr. and Mrs. Rochefort
but to Mr. Rochefort and Mr. Fontaine and therefore this requirement has
not been met. Respondent’s counsel referred me to the cases of Davidson v R and Goyer
as dispositive of the matter. With respect, I disagree. In Davidson,
Justice McArthur found that an individual, Ms. Waterhouse, who became a
joint tenant with Mr. Davidson but solely to financially help Mr.
Davidson, who occupied the new home, was a particular individual along with Mr.
Davidson, as she had signed the Agreement of Purchase and Sale. As such, she
had to meet the subsection 254(2) of the Act requirements, which she did
not. In the case before me, Mr. Fontaine was not a particular individual: the
situation is simply different.
The Respondent also
referred me to the more recent case of Goyer, but again this confirms
the same principle as set out in Davidson: that is, where a taxable
supply is made to a "particular individual", if the particular
individual is a group, all members of the group must meet the requirements of
subsection 254(2) of the Act.
In the case before me,
Mr. and Mrs. Rochefort are the "particular individuals". Clearly, Mr.
Rochefort meets all the subsection 254(2) of the Act requirements. The
question is - did Mrs. Rochefort; more specifically, did Mrs. Rochefort
have any ownership transferred to her as required by subparagraph 254(2)(e)
of the Act.
argued that "ownership" means title to the property. She referred me
to Justice Bell’s decision in 277287 Alberta Ltd. v R where he
canvassed the meaning of "ownership" in the context of section 336 of
the Act. He relied on provincial laws, in that case the Land
Alberta, to assist in defining ownership to include beneficial ownership.
Respondent’s counsel pointed out that Ontario’s Land Titles Act defines
"owner" as an owner in fee simple. She suggests that should be
the definition for purposes of the Act. I do not agree that is an end to
I refer back to 277287
Alberta Ltd. where Justice Bell stated:
11. … It would have been an easy task for the persons
preparing this legislation to have used clear language had they sought to
confine the meaning of "ownership" to legal title.
Transfer of ownership,
as required by the Act, cannot include beneficial ownership in Alberta but not beneficial ownership in Ontario. Interpretation of "ownership"
for purposes of the Act, and specifically subsection 254(2) of the Act
should be consistent. I agree with Justice Bell that if the legislators
had intended ownership to mean title they could have said so, and not left it
to differing provincial laws to complete the meaning. No, "ownership"
for purposes of a GST/HST New Housing Rebate must be explored in a textual, contextual
and purposive manner for a fuller meaning than simply title.
Textually, as already
indicated, I do not read "ownership" as equating to legal title.
Black’s Law Dictionary provides a more fulsome definition:
collection of rights allowing one to use and enjoy property, including the
right to convey it to others: ownership implies the right to possess a thing
regardless of any actual or constructive control.
subsection 254(2) of the Act must be read in conjunction with section
133 of the Act. That provision establishes the fact of, and timing of, a
taxable supply. Subparagraph 254(2)(e) of the Act presupposes
there has been a taxable supply and now something different needs to happen to
satisfy the requirement, a transfer of ownership. So, neither entering an
Agreement of Purchase and Sale nor receiving title to a property is sufficient
on its own to constitute ownership for the purpose of subparagraph 254(2)(e).
Context confirms that ownership should be viewed more expansively, which leads
to a purposive look.
Who is subsection
254(2) of the Act intended to benefit? Clearly, a buyer of a new house
who intends to live in the property. I read subparagraph 254(2)(e) of
the Act as mainly a timing condition – ownership takes place after
substantial completion. In the Government release, "Rebate for Builder
Built Unit (land purchase)", in July 1998, as amended in 2002 and 2005,
the Government in paragraph 6 of that publication stated:
6. Rebate for individuals – An individual qualifies under
section 254 of the Act for a rebate of part of the GST/HST paid on a
unit if all of the following conditions are met…
(f) Occupancy timing – No one occupies the unit as a
place of residence of lodging between the time construction or
substantial renovation is substantially completed and the time possession is
transferred to the individual.
It appears the Government recognizes the emphasis in
subparagraph 254(2)(e) of the Act is on the timing.
From a policy
perspective, the Rocheforts are clearly who the rebate is meant to benefit, as
they are the buyers of the property, the ones liable for the GST, and they took
possession of the property after substantial completion to reside in it as
their primary residence.
The matter really
boils down to whether Mrs. Rochefort acquired sufficient rights to
constitute ownership and therefore Mr. Rochefort met the conditions set
forth in subparagraph 254(2)(e) of the Act. Mrs. Rochefort signed
an agreement to become the owner, she provided deposit monies to become the
owner, she acted as owner in making decisions amending the Purchase and Sale
Agreement, she was liable for the GST, she took possession of the property with
her husband and in every way she behaved as an owner by using and enjoying the
property. As for whether she held any right to convey the property, there are a
couple of possible avenues where she may have obtained such a right. First, as
a beneficial owner of the property, and, second, as a spouse living in the
What evidence is there
of a beneficial ownership by Mrs. Rochefort in the property? Did Mr. Fontaine
hold legal ownership in the property in trust for Mrs. Rochefort? To say
the arrangement between the Rocheforts and Mr. Fontaine was loose is mildly
understating the situation. What is the evidence?
a) Mr. Fontaine had no
intention of having to pay anything with respect to the property either by way
of purchase price or ongoing expenses;
b) Mr. Fontaine and the
Rocheforts believed Mr. Fontaine had no right to any gain from the property;
c) Mr. Fontaine did not
appreciate he was going on title as an owner; he was simply doing the
Rocheforts a favour;
d) the Rocheforts and Mr.
Fontaine considered that the property was the Rocheforts; and
e) Mr. Rochefort
believed he could at any time require Mr. Fontaine to transfer title to the
I conclude that in
these circumstances, Mr. Fontaine agreed to hold title solely for the benefit
of the Rocheforts, and, as a trustee of the property, was required to convey
title to the Rocheforts on demand, or to any third party at their request.
That, I find, was the deal and satisfies me Mrs. Rochefort was a beneficial
From a family law
perspective, I note that section 21 of the Family Law Act of
Ontario provides that a spouse cannot dispose of an interest in the matrimonial
home unless the other spouse consents to the transaction. This indicates some
right with respect to any conveyance of the house.
Taking an expansive
view of ownership, not limited to legal title, bundling Mrs. Rochefort’s rights
together as sufficient to constitute ownership, considering the purpose of
subsection 254(2) of the Act would be met if the rebate was granted, and
distinguishing this case from those where the supportive third party funder is
considered a "particular individual", I conclude that Mr. Rochefort is
entitled to the new housing rebate in accordance with the requirements in
subsection 254(2) of the Act. The Appeal is allowed and referred back to
the Minister for reassessment in accordance with these Reasons.
Signed at Ottawa, Canada, this 31st day of January 2014.
"Campbell J. Miller"