Tax Court of Canada Judgments

Date: 20000822

Docket: 2000-356-GST-I

BETWEEN:

HEATHER L. EARNSHAW and LINDA M. THRONESS,

Appellants,

and

HER MAJESTY THE QUEEN,

Respondent.

Reasons for Judgment

Sarchuk J.T.C.C.

[1] This is an appeal by Heather Louise Wassink (nee Earnshaw) and Linda M. Throness from an assessment made by the Minister of National Revenue (the Minister) on May 18, 1999 denying their application for 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 and improved the property with residential buildings. On May 20, 1993, the Appellants purchased, as a personal residence, an interest in a leasehold condominium at 104-5835 Hampton Place from Polygon Development VIII Ltd. (Polygon). This interest was acquired by way of assignment of one of the stratified leases converted from the developer's lease when the Appellants acquired the residential strata unit from Polygon. The purchase price was $229,900. Upon closing, the Appellants also paid to Polygon net GST of $10,299.52 (GST of $16,093 less a GST New Housing Rebate assigned by the Appellants to Polygon of $5,793.48). A General Application for Rebate of GST was filed by the Appellants and received by the Minister on February 9, 1999. By notice of assessment dated May 18, 1999, the Minister denied the rebate on the basis that "the application was not filed within the prescribed time limit provided by section 261 of the Excise Tax Act.

[3] Evidence was also adduced from Heather Louise Wassink (nee Earnshaw), Raymond Takyan Ng (Ng)[1] and from Ricky Wong (Wong). Wassink testified that she and Throness purchased their condominium in May 1993 and at the time of its acquisition were required by the developer to pay GST. In or about May 1995, the strata council for St. James House on Hampton Place organized a meeting with an accountant with respect to possible applications for GST rebates. Throness attended and after hearing the discussions decided to apply for the GST rebate. The Appellants commenced putting together all of the necessary paperwork the accountant needed. They knew many of the people residing in similar strata units and, while in the midst of organizing this material, heard that a number of these individuals had received "letters from Revenue Canada saying that the GST was not due back to us". Wassink said the number of such reports was sufficient to lead the Appellants to stop the process and not proceed with their application for a rebate. In July 1996, the Appellants sold their strata unit and moved. Subsequently, in late 1998 or early 1999, they heard "through the grapevine" that "friends had now gotten money back" and learned that others in that community were also pursuing the issue.[2] This information prompted them to complete and submit their application for rebate.

[4] 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.[3] 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.

[5] Wong, a Vancouver businessman, purchased a strata unit in Hampton Place and lived there until 1998. A short time following his departure, one of his former neighbours contacted him with respect to the GST issue and suggested that he file an application for rebate. He also learned that an application form would have to be filed by June 30, 1998. Wong said he was unsure as to what was needed and went to Revenue Canada for information. The advice he received was that there was not much likelihood of success in claiming a General Rebate but that he was probably entitled to a New Housing Rebate and was given application forms for that purpose. He specifically recalled asking the Revenue Canada official what would happen if the Appellants Taylor and Redmond were successful and this decision was handed down after June 30, 1998, the expiry of his four-year limitation period. He says the response was "if they win, everybody will get everything".

Legislative Scheme

[6] The relevant provisions of the Act in effect on February 9, 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. [4] [5]

Appellants' position

[7] Counsel for the Appellants argued 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. He argued that if their application is statute-barred, their failure to file within the requisite time was the result of negligent advice given by the Minister's servants and agents prior to the expiration of the limitation period that they were not entitled to a rebate.

[8] Counsel conceded that these Appellants could be distinguished from Braxton and Diane Alfred in that they were unable to identify a specific incident where an officer or agent of Revenue Canada provided them with erroneous information with respect to their right to a General Rebate. However, he contends that 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. He argued that it was sufficient that Earnshaw and Throness had been advised of this position by others and believed that implicit in Revenue Canada's position was that they should not make an application because it would not be successful. Counsel further submitted that the Appellants, being aware of Revenue Canada' position, 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, they failed to submit their application within the time period prescribed.

[9] In the alternative, the Appellants rely on the decision in Taylor and Redmond v. The Queen 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 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.[6]

[10] In support of this 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.[7] 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,[8] 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] On the evidence, it is reasonable to conclude that it was generally known that a dispute existed between purchasers of strata units and Revenue Canada regarding the "rebate issue" and that Revenue Canada was reconsidering its position. It is also a fact the Appellants became aware of their potential entitlement to a rebate at the very latest in May 1995 when Throness attended a general meeting and left satisfied that an application for a General Rebate was warranted. At some point of time shortly thereafter, the Appellants also learned that Revenue Canada officials had advised a number of purchasers that they were not entitled to rebates. Accepting that determination as correct directly led the Appellants to abandon 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,[9] 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 law were not met.

This principle was applied in Stickel v. M.N.R.[10] 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:[11]

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 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 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.[12]

[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 Ac[13]t. 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.[14]

[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).[15]

[20] Several other grounds of appeal were pleaded 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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