Date: 19990915
Docket: 98-1106-GST-I
BETWEEN:
GASTOWN ACTORS STUDIO LTD.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
O'Connor, J.T.C.C.
[1] This appeal was heard at Vancouver, British Columbia on April 29, 1999 pursuant to the Informal Procedure of this Court. After the conclusion of the hearing, it was agreed that counsel would submit written submissions to the Court over a period of time. The last submission consisting of the Appellant's rebuttal was submitted to the Court in July of this year.
[2] The principal issue is whether supplies during the period August 1, 1992 to July 31, 1996 consisting of the full-time program and the independent study ("ISP") program offered by the Appellant constituted exempt supplies pursuant to paragraph 8 of Part III of Schedule V to the Excise Tax Act ("Act") with the result that no GST was collectible on the tuition fees paid by students for these programs. A subsidiary issue was whether, even if the supplies in question were exempt, did the Appellant in fact collect amounts from its students allegedly as GST and if so must the amounts collected be remitted to the Minister of National Revenue ("Minister").
Facts:
[3] I find the facts to be as follows:
1. The Appellant was registered under Part IX of the Act effective January 1, 1991 and was assigned GST Registration No. 125228668.
2. The Appellant is registered under the authority of the Private Post Secondary Education Act of British Columbia to operate as a private post-secondary institution, effective February 1, 1993. The Private Post-Secondary Education Commission ("PPSEC") established under this Act governs private training institutions in British Columbia and approves the courses offered. For example, the PPSEC approved the programs prepared by the Appellant.
3. The Appellant is a "vocational school" as defined in paragraph 1 of Part III of Schedule V to the Act.
4. The Appellant operates an acting school and its main source of revenue was tuition fees.
5. The Appellant offers a two year full time acting program, a part-time program and an eight month ISP program to members of the general public. The programs were described by M.W.A. Tuck, the owner of the Appellant, as follows:
A. Okay. We have a full-time programme which is a two-year programme, ... It's two years, it's ten months per year and they get all the basic foundation training that you would get if you were in any of the schools like the ones that I've taught at or been involved with before.
And it's a basic training, fundamental ABCs. We have an ISP programme, which is an independent study programme, in which you are required to become eligible for government funding, meaning student loans. You have to cover 16 hours of training in a period of time and it's usually an eight-month period and it comes in two blocks of four months, I believe. And in that period of time, you take the courses that you are looking to take that are available at the studio.
And then the part-time programme is more geared towards the working professional, although it's not exclusively that, but it is geared in that direction because when I came to – back to Vancouver, it was the beginning of the boom of the industry, as it is called in the profession.
...
Q. I'd like to show you a document that you can identify for me. Now, on the front cover it indicates Gastown Actor Studio 1995-1996?
A. Right.
Q. Full-time programme course outline. And you're familiar with that?
A. Yes.
Q. What is this actually?
A. Basically that lays out what the student will take in the two-year time that they're at the school in the full-time programme.
Q. Okay. There's a common – I'll turn you to page – the second page over?
A. Right.
Q. And the second paragraph down reads:
The objective of this programme is to help the student gain all the skills and tools necessary or needed to be successful as a professional actor. The curriculum is based in part on the programmes of the University of Alberta and Ryerson Polytechnic Institute, two of the best regarded acting schools in Canada.
A. Mm-hmm.
6. Potential students who apply for entry into the full time program are interviewed by the Appellant and the places are filled on a first come, first served basis.
7. The students are not given grades but they are evaluated regularly and advised by their teachers as to their strengths and weaknesses. They are also required to put on a public performance.
8. A Certificate of Achievement is issued only to the students who complete the two year full-time program or the ISP program.
9. The certificate issued to students does not make mention of the competence of the individual to practice or perform a trade or vocation but states that the student has attended the two year program or the ISP program.
10. The Appellant is not a public institution, nor is it a non-profit organization for purposes of paragraph 8 of Part III of Schedule V to the Act.
11. Actors to perform their trade or profession must be members of a union. For actors involved in media such as film and television the union is named ACTRA and for stage actors the union is named EQUITY. The unions do not require evidence of the actors' certificates or other qualifications before being admitted to the union.
[4] Based on the uncontradicted evidence of several of the witnesses called by the Appellant, the Appellant is a well recognized and high quality school for the education of actors with excellent teachers. For example, Sid Kozak, an experienced casting director, stated as follows:
A. How would I assess that? In terms of assessing it as an institution of learning, I know from my experiences with the acting community at large that Gastown is respected as one of the better institutions in this city where actors go to train.
...
A. I know most of the teachers there. I know them to be – in many cases they are actors themselves and they are reputable. They are actors that I would – that are members of the community I would draw upon for the job I have to do.
...
A. The students fit into the acting community quite well as far as I see. I have on many occasions seen actors who have come out of the school. Basically, when I select actors to – as potential actors for my role, my putting them in as actors for a role in a movie, training is one of the basic things I look on in the resumé. And if I see Gastown Actors Studio, I know that they've had some good training.
...
A. I would say so. I would say that they're well equipped with the fundamentals to be good actors. I think if I may say that because acting is a form of self-expression in the same way that dancing is. That the graphic arts are. People evolve in those disciplines of self-expression. And I think that the actors that I see out of Gastown have got a good foundation for that.
[5] Mr. Kozak's testimony was corroborated in the main by that of other witnesses.
[6] The written submissions of the Appellant and of the Respondent's counsel address both the issues outlined above. For the following reasons, I do not intend to fully address the subsidiary issue namely whether or not the Appellant collected GST from its students and should have remitted that to Revenue Canada even if its supply was an exempt supply. I have only the following comments:
1. My judgment on the main issue is that the supplies under consideration were exempt. Consequently, if the Appellant collected amounts, those amounts were not GST as no GST was exigible. Thus, the said amounts, if collected, need not be remitted to the Minister.
2. It may well be that this Court does not have jurisdiction to make a judgment on this issue. I believe, without definitely deciding the issue, that the jurisdiction of this Court in relation to the Act is to determine whether the assessment in question is good or bad in whole or in part, i.e. the jurisdiction does not extend to the actual collection of the GST. Sections 302 and 306 of the Act would appear to support this.
3. I believe it will be possible following my judgment on the main issue for the Minister to delve into the facts, make the necessary determinations including, in particular, what portion of the total tuition fees related to the various programs, and for what periods of time (the full-time program only started in September 1993) and what other revenues the Appellant had and reassess accordingly. If the Appellant disagrees with such a reassessment it would still be open to the Appellant to file a Notice of Objection to that reassessment and proceed further if necessary.
Submissions Of Counsel For The Appellant – Main Issue:
[7] Counsel for the Appellant points out that the bone of contention with the Respondent relates to whether the certificate which merely states that the student in question has completed the program can be considered as attesting to the competence of the student to practice or perform his or her trade or vocation, namely, acting.
[8] To quote from counsel's written submissions:
20. In the present case the certificates issued by the Appellant must "attest" to the competence of the Appellant's students, who complete their courses, to perform their chosen vocation of acting. What is meant by the word "attest"? Does it require that the issued certificate state in writing that the student is now competent to perform in the acting profession? If this is the criteria for exemption from GST then it is obvious the Appellant has not met the criteria since its certificate, like so many others issued by reputable schools teaching vocational courses, simply states that its students have completed the program of study. It is submitted that this cannot be the criteria for exemption. If it were it would be exceedingly straightforward to maneuver entitlement to the exemption in paragraph 8 of Part III of Schedule V simply by having the words "Mr. Smith is competent to perform as an actor" typed on the certificate.
21. How should the phrase "certificates .. that attest to the competence of individuals to practice or perform a trade or vocation" be interpreted? In the case of Corporation Notre-Dame do Bon-Secours v. Communaute Urbaine de Quebec et al, 95 DTC 5017, the Supreme Court of Canada stated at page 5023 that,
"The Rules formulated in the preceding pages ... may be summarized a follows:
- The interpretation of tax legislation should follow the ordinary rules of interpretation;
- A legislative provision should be given a strict or liberal interpretation depending on the purpose underlying it, and that purpose should be identified in light of the context of the statute, its objective and the legislative intent: this is the teleological approach;
- The teleological approach will favour the taxpayer or the tax department depending solely on the legislative provision in question, and not on the existence of predetermined presumptions;
- Substance should be given precedence over form to the extent that this is consistent with the wording and objective of the statute;
- Only a reasonable doubt, not resolved by the ordinary rules of interpretation, will be settled by recourse to the residual presumption in favour of the taxpayer;
22. The ordinary rules of interpretation would suggest a review of the dictionary meaning of the words used in the contested phrase.
(i) "certificate"
The Oxford English Dictionary (at Tab 4B) states (at definition 3A) that a certificate is "a document wherein a fact is formally certified or attested". The Webster's Third New International Dictionary indicates that the word "certificate (in definition 1) is "a document issued by a school, a state agency, or a professional organization certifying that one has satisfactorily completed a course of studies, has passed a qualifying examination or has attained professional standing in a given field and may officially practice or hold a position in that field".
There is no doubt that what the Appellant issued to its students would qualify as a certificate under these definitions.
(ii) "attest"
The Oxford English Dictionary (at Tab 4A) states that the word "attest" means, among other things, "to bear witness to". Webster's Third New International Dictionary indicates that the word "attest" also means, among other things, to "bear witness to".
It is submitted that in order for a certificate to "bear witness to" the competence of a student no precise wording need be included on the face of the certificate.
[9] After reviewing some of the evidence of the Appellant's instructors, counsel for the Appellant states as follows in his written submissions:
25. It is submitted that given:
1. the caliber of instructors employed by the Appellant,
2. the demanding program that students are put through before completing their studies, and
3. the perception of the Appellant and its instructors in the acting community,
there is no doubt that a certificate issued by the Appellant bears witness to the sufficient skills of its graduates to perform as actors. In order for the services provided by the Appellant to qualify for exemption from GST under paragraph 8 of Part III of Schedule V there is nothing further to be proved.
26. The Respondent lead cross-examination which suggested that paragraph 8 of Part III of Schedule V was aimed at certificates which were more in the nature of a mandatory requirement before one could be in fact be employed in a particular vocation. It is submitted for the following reasons that this is too narrow a reading of paragraph 8.
(i) Paragraph 6 of Part III of Schedule 8 (found at Tab 6) already addresses the matter of certificates which are issued in respect of courses leading to "a professional or trade accreditation or designation recognized by a regulatory body". Paragraph 8 would therefore be made redundant if it did not refer to certificates that were qualitatively different than those referred to in paragraph 6.
(ii) In the Department of Finance 1989 technical paper (found at Tab 5) which discusses the design of the GST it is stated at page R179 under the heading "(iv) Training in Private Vocational or Language Schools" that,
"instruction in courses which are part of a program to develop or enhance student's occupational skills will be exempt when supplied by establishments or organizations which are organized and operated primarily to supply those services. These include private secretarial schools and business colleges.
To be exempt, courses must be designed primarily to develop occupational skills and must be part of a program leading to a diploma or certification of competence similar to that provided by a community college or similar institution."
This technical paper sets out the purpose behind the exemption in paragraph 8 of Schedule V. Clearly a certificate from a secretarial or business school is not a prerequisite for engaging in employment as a secretary or business manager. The wording of paragraph 8 should therefore not be construed to find that the term "certificate" refers to a document which is a requirement before one can practice one's vocation.
27. To the extent that there is any ambiguity in the wording of the exempting provision of paragraph 8 the Bon-Secours case states that "reasonable doubt, not resolved by the ordinary rules of interpretation, will be settled by recourse to the residual presumption in favour of the taxpayer". Although the Appellant is of the view that there is no ambiguity and that it should be entitled to an exemption, any ambiguity, if found, should be decided in its favour.
Submissions Of Counsel For The Respondent – Main Issue:
[10] To quote from the Respondent's written submissions:
33. With respect to the full time program, the Respondent submits that the certificates issued by the Appellant do not attest to the competence of its students to be professional actors. It is the certificate itself that the section requires to "attest". The certificate given out by the Appellant simply states that the person has completed the two year program [Exhibit A-2}. It does not even go so far as to state that the person has "successfully" completed the program. To meet the requirements of the section, the certificate must refer in some way to the person being competent. ...
...
36. Second, it is a standard principle of statutory interpretation that the word "certificate" in section 8 must be read in the context of the words that follow it, those words being "diplomas, licenses or similar documents." Simply labeling a piece of paper a "certificate" is not sufficient. It is the submission of the Respondent that those words imply a degree of formality which is simply not present in the certificates issued by the Appellant regardless of what it may type on the front.
37. A diploma implies some course of academic study leading to a particular title or qualification. Similarly, the issuing of a license implies that a person has reached a standard that allows him or her to undertake an activity that he or she was previously barred from, usually by government regulation.
...
39. The definition of certificate, found at Tab B of the Appellant's book of authorities, carries identical implications. Certificate is defined as "a document wherein a fact is formally certified or attested". Certified is defined as "made certain, assured, certainly informed". The only fact mentioned on the certificate is that the two year program was completed. The Webster's definition of certificate is even more enlightening. A certificate is "a document containing a certified and usu. official statement: a signed, written or printed testimony to the truth of something". Once again, the only printed testimony offered by Exhibit A-2 is that the course has been completed , not that the student was competent or met any particular criteria. The certificates of the Appellant do not contain any statement that could be characterized as official.
...
44. In paragraph 26 of the Appellant's argument it is implied that the certificate awarded by the Appellant is akin to that granted by a secretarial or business school. This is not a valid comparison. The granting of a certificate from a technical school would usually imply that testing of some sort has occurred and that a minimum standard has been met. The fact that this is not done in the course of the Appellant's program is precisely the point of concern raised by the Respondent. The Appellant also sought to compare its program with those of academic institutions such as Ryerson and the University of British Columbia. Once again, these institutions would have a formal evaluation process and would also have strict admissions criteria.
45. The certificate awarded by the Appellant is more in the nature of a certificate of completion that would be awarded at the conclusion of a continuing education course offered by a community college. Anyone can sign up for the course and as long as they attend the majority of the classes they will be awarded a certificate of completion.
46. It is the submission of the Respondent that in order to qualify as a certificate under section 8 a document must state, or at the very least stand for the proposition that, some specific standard of competence has been met. This is the only interpretation of the word certificate that makes sense given its dictionary meaning and in the context of the words diploma and license. To interpret the section otherwise would mean that any course could gain tax exempt status by simply printing off a "certificate" from the laser printer at the end of the term. In the submission of the Respondent, that is not consistent with the intent of the legislation.
Rebuttal Submissions Of The Appellant:
[11] In the Appellant's written rebuttal the following is stated:
6. The Respondent incorrectly states at paragraph 32 that only the full time program offered by the Appellant lead to a certificate of any sort. The testimony of Andrea Macdonald made it clear that a certificate was also issued for the independent studies program. It was agreed by the Appellant that the part time program did not lead to certificates.
7. In paragraph 35 of its Argument the Respondent indicates that in order to be exempt a supply must meet certain criteria. It goes on to say that the criteria involves some element of regulation of the institution by a federal or provincial government and the institution will have to meet any criteria set out therein before it can issue certificates. This is directly on point. The Appellant is subject to provincial government regulation. The Respondent has admitted that the Appellant meets all other requirements for exemption other than with respect to the certificates it issues. To indicate that the certificates issued by the Appellant must have added to them, as stated in paragraph 33 of the Respondent's Argument, the words "successfully", "has met all the requirements of" or "has qualified for the certificate of", is, with all due difference [sic], untenable. This cannot be the method by which exempt status is achieved. As was abundantly clear from the testimony of the Appellant's instructors no certificate is issued by the Appellant unless the program has been "successfully" completed, the student "has met all of the requirements of" the program and "has qualified for the certificate". It cannot with all sincerity be maintained that failure to use such words gives the impression that the student has "unsuccessfully" completed the program or "met only some of the requirements" for completing the program. The addition of these words to the certificate would not assist someone seeing the certificate to understand, as stated by the Respondent in paragraph 33, "which is involved in obtaining one".
8. The Appellant rejects completely the Respondent's characterization of the evidence given by the Appellant's instructors as to the evaluation process that is gone through by its students. Both Mr. Tuck and Mr. Hanlon indicated that an interview was had with perspective students prior to students enrolling in the full time program. Some screening was done through the interview process. Both Mr. Tuck and Mr. Hanlon indicated a critical evaluation of students on a regular basis was carried out and that a formal evaluation was done each semester. ...
9. In paragraph 49 of the Respondent's Argument the Respondent indicates that it is not valid to compare certificates issued by the Appellant to certificates issued by secretarial or business schools. The Respondent indicates that this is not a valid comparison because the "granting of a certificate from a technical school would usually imply that testing of some sort has occurred and that a minimum standard has been met". It is submitted that the comparison is directly on point. The Appellant is a vocational school, as agreed to by the Respondent, that is regulated by the province. This would imply, using the Respondent's words, that testing of some sort has occurred and that a minimum standard has been met before a certificate is issued. As previously stated the Appellant's instructors testified that testing, in the form of critical evaluation, occurred and that minimum standards were required. The fact that the evaluation method did not involve a written exam, as it might at a secretarial or business school, simply turns on the question of that is the most appropriate evaluation method for actors. Competent actors must be able to act and are evaluated by the Appellant on that basis.
Analysis And Decision:
[12] Part III of Schedule V of the Act provides for various services which are considered as exempt supplies. To quote paragraph 8 of Part III of Schedule V the following specific supply is exempt:
8. A supply, other than a zero-rated supply, made by a school authority, vocational school, public college or university of a service of instructing individuals in, or administering examinations in respect of, courses leading to certificates, diplomas, licences or similar documents, or classes or ratings in respect of licences, that attest to the competence of individuals to practise or perform a trade or vocation where
(a) the document, class or rating is prescribed by federal or provincial regulation;
(b) the supplier is governed by federal or provincial legislation respecting vocational schools; or
(c) the supplier is a non-profit organization or a public institution;
[13] It is clear that all of the requirements of Part III, but perhaps one, have been met. The only dispute is over the wording of the certificate. The situation is unique as we are dealing with the competence of a particular person to act. Acting is a skill developed by training and expertise. It also has personal elements such as appearance, voice, innate talent, etc. I believe it would be very difficult for a college to issue a certificate saying with absolute certainty that a certain student is competent to act. It is quite another thing to say with some certainty that a person is competent to carry on the trade of carpentry, plumbing or other trades where the skill is a physical one only.
[14] In the present case the evidence establishes that the school has an excellent reputation for turning out good actors. Thus, someone seeing a certificate attesting to the fact that a student has completed the two year program or the ICS program at GasTown Actors Studio Ltd. can easily make a judgment that the student in question is competent to act. The very name of the school includes the words "Actors Studio". Moreover, one must consider the persons who will rely on the certificate or on a resumé referring to the certificate. These would be mainly persons in the acting industry – directors, agents, casting directors and producers. They would be familiar with the Appellant's reputation turning out persons competent to act. In other words, a certificate stating that a person has completed a particular program would be enough. Using the teleological approach one must ask why certain supplies were made exempt. These are set forth in Schedule V of the Act and were chosen by Parliament for policy reasons. One of those policies was to encourage people to attend schools or take courses to improve or provide them with skills leading to employment or better employment. This is clear from the Department of Finance 1989 technical paper cited above.
[15] In view of this, I believe a liberal construction should be given to the provision in question following the approach in the Notre Dame de Bon-Secours case. Using that approach one should be able to look at the excellence and reputation of the school involved, also bearing in mind that it and its programs are regulated by a province. Again, in my view, it is not important that the unions did not demand to see the certificates before admitting an aspiring actor.
[16] Thus the words "certificate" and "attest" should not be restrictly interpreted.
[17] For these reasons, I am of the opinion that the tuition fees for the two year program and the ICS program offered by the Appellant constitute exempt supplies within the meaning of paragraph 8 of Section III of Schedule V of the Act. Consequently, the appeal is allowed with costs and the matter is referred back to the Minister for reconsideration and reassessment on this basis and further on the basis that the Appellant is not entitled to any input tax credits claimed in respect to supplies received in relation to these programs.
Signed at Ottawa, Canada September 15, 1999.
"T.P. O'Connor"
J.T.C.C.