Tax Court of Canada Judgments

Date: 20000128

Docket: 97-736-GST-G

BETWEEN:

SIR WYNNE HIGHLANDS INC.,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

Reasons for Judgment

Sarchuk J.T.C.C.

[1] This is an appeal under the Excise Tax Act (the Act) from a reassessment by the Minister of National Revenue's (the Minister) for the Appellant's reporting period January 1, 1991 to September 30, 1994 by virtue of which the Appellant was assessed net tax of $822,751.78 (representing an upward adjustment of $366,022.62 from the amount of net tax as reported by the Appellant in its filed returns) and interest of $92,210.27 and penalty of $91,344.15. The Appellant's objection to the assessment was allowed in part, and on December 13, 1996 the Minister reassessed reducing net tax, interest and penalty to $737,646.38, $76,796.43 and $75,255.75.

[2] The Appellant is a corporation which, during the relevant period, was engaged in the business of development and sale of residential real estate. The matters at issue pertain to a subdivision of the City of Vaughan, Ontario and flow from various agreements of purchase and sale of homes to be constructed by the Appellant. The Appellant claims these homes are exempt from goods and services tax (GST) under the Act. The Minister disagrees.

[3] For the purposes of this appeal, the parties have agreed to a partial statement of facts with respect to each of the issues raised. In addition, the Court heard the testimony of Vince Peticca for the Appellant and Tony Ing and Robert Young on behalf of the Respondent.

Issue 1: Amendment to Agreements of Purchase and Sale – Were the Homes Sold Pursuant to a Written Agreement Prior to October 14, 1989?

[4] The parties have agreed that during the relevant period of time, the Appellant sold six homes under the following circumstances:

A. Lot 50 - Purchaser – Yannuzzi

8. On February 1, 1989, the Appellant and Maria and Alberto Yannuzzi (the "Yannuzzis") entered into an agreement of purchase and sale, a copy of which is located at Tab 9 of the Joint Book of Documents. The agreement referred to Lot 121 of the draft plan, to a type 3050 house, and to a purchase price of $580,000.

9. On March 3, 1989, the Appellant and the Yannuzzis entered into an agreement of purchase and sale, a copy of which is located at Tab 10 of the Joint Book of Documents. The agreement referred to Lot 136 of the draft plan, to a type 3565 house and to a purchase price of $630,000.

10. On August 22, 1989, the Appellant and the Yannuzzis signed a document entitled "Amendment to Agreement of Purchase and Sale" deleting the reference to Lot 136 and replacing it with a reference to Lot 50 Jolana Court - "The Pinegrove", Elevation B. A copy of this document is located at Tab 11 of the Joint Book of Documents.

11. In the final plan approved by the City of Vaughan, Lot 136 of the draft plan was re-numbered to Lot 50.

12. On August 21, 1990, the Appellant and the Yannuzzis entered into an agreement of purchase and sale, which referred to Lot 50 Jolana Crt., Woodbridge, Ontario, to house type "The Renshaw", Elevation A, to a purchase price of $525,000, and to a closing date of December 28, 1990. A copy of this agreement is located at Tab 12 of the Joint Book of Documents.

13. On or about November 27, 1990, the Yannuzzis and the Appellant signed a document entitled "Amendment to Agreement of Purchase and Sale" deleting the reference to a closing date of December 28, 1990 and inserting a reference to a closing date of February 28, 1991. A copy of this document is located at Tab 13 of the Joint Book of Documents.

14. The sale by the Appellant to the Yannuzzis closed on February 28, 1991. A copy of the Statement of Adjustments (Amended) is located at Tab 14 of the Joint Book of Documents.

B. Lot 64 - Purchaser – Dolan

15. On March 16, 1989, the Appellant and Kevin Dolan and Lorena Galant-Dolan (the "Dolans") entered into an agreement of purchase and sale, a copy of which is located at Tab 15 of the Joint Book of Documents. The agreement referred to Lot 123 of the draft plan, to #3775 type house (Elevation A), and to a purchase price of $694,500.

16. On September 28, 1990, the Appellant and the Dolans signed a document entitled "Amendment to Agreement of Purchase and Sale" deleting the reference to Lot 63 Jolana Court (of the final registered plan) and replacing it with a reference to Lot 64 Jolana Court (of the final registered plan). A copy of this document is located at Tab 16 of the Joint Book of Documents.

17. On November 2, 1990, the Appellant and the Dolans signed a document entitled "Amendment to Agreement of Purchase and Sale", pursuant to which, inter alia, the purchase price was reduced from $694,500 to $619,000 and the reference to Quality Features – Schedule "A" was deleted and replaced by a reference to New Schedule "A" attached. The closing date was set as February 1, 1991. A copy of this document is located at Tab 17 of the Joint Book of Documents.

18. The closing date was subsequently extended. The sale by the Appellant to the Dolans closed on March 22, 1991. A copy of the Statement of Adjustments is located at Tab 18 of the Joint Book of Documents.

C. Lot 72 - Purchaser - Sgro

19. On February 3, 1989, the Appellant entered into an agreement of purchase and sale with Frank Sgro ("Sgro") referring to Lot 130 of the draft plan. A copy of the agreement of purchase and sale is located at Tab 19 of the Joint Book of Documents.

20. On March 16, 1989, the Appellant and Sgro entered into an agreement of purchase and sale referring to Lot 68 of the draft plan and a purchase price of $738,000. A copy of this agreement of purchase and sale is located at Tab 20 of the Joint Book of Documents.

21. On October 3, 1989, the Appellant and Sgro signed a document entitled "Amendment to Agreement of Purchase and Sale", which deleted the reference to Lot 68 and replaced it with a reference to Lot 123 Longview Crescent. A copy of this document is located at Tab 21 of the Joint Book of Documents.

22. In April, 1991, the Appellant and Sgro signed a document entitled "Amendment to Agreement of Purchase and Sale", which provided, inter alia, that Lot 72 of the final registered plan would be purchased instead of Lot 68, the purchase price would be reduced to $440,000, the closing date would be September 27, 1991 and the model type would be changed. A copy of this document is located at Tab 22 of the Joint Book of Documents.

23. On July 16, 1991, the Appellant and Sgro signed a document entitled "Second Amendment to Agreement of Purchase and Sale", which, inter alia, provided that the closing date would be August 30, 1991 and that the purchase price would be $415,707, after allowing for certain reductions and increases. A copy of this document is located at Tab 23 of the Joint Book of Documents.

24. On August 27, 1991, the Appellant and Sgro signed a document entitled "Third Amendment to Agreement of Purchase and Sale", which provided that the purchase price would be $410,002 to account for various installations and credits. A copy of this document is located at Tab 24 of the Joint Book of Documents.

25. The sale by the Appellant to Sgro closed on August 30, 1991. A copy of the Statement of Adjustments is located at Tab 25 of the Joint Book of Documents.

D. Lot 60 - Purchaser - Venneri

26. On February 1, 1989, the Appellant and Frank Venneri ("Venneri") entered into an agreement of purchase and sale, which referred to house type "4200 sq. ft. similar to Columbus", to Lot 124 of the draft plan, and to a purchase price of $740,000. A copy of the agreement of purchase and sale is located at Tab 26 of the Joint Book of Documents.

27. On July 19, 1990, the Appellant and Venneri signed a document entitled "Amendment to Agreement of Purchase and Sale", which, inter alia, deleted the reference to Lot 124 of the draft plan and replaced it with a reference to Lot 62 Jolana Crt. of the final plan, deleted the reference to 4200 sq. ft. and replaced it with a reference to 5100 sq. ft., deleted the reference to the purchase price of $740,000 and replaced it with a reference to $750,000, and inserted a reference to a closing date of November 30,1990. A copy of this document is located at Tab 27 of the Joint Book of Documents.

28. In May of 1991, the Appellant and Venneri signed a document entitled "Amendment to Agreement of Purchase and Sale", which provided, inter alia, that Lot 60 of the final registered plan would be purchased instead of Lot 124, the purchase price would be reduced to $614,000 and the closing date would be September 27, 1991. A copy of this document is located at Tab 28 of the Joint Book of Documents.

29. On October 7, 1991, the Appellant and Venneri signed a document entitled "Amendment to Agreement of Purchase and Sale", which deleted the reference to the closing date of September 27, 1991 and replaced it with a reference to a closing date of October 31, 1991. A copy of this document is located at Tab 29 of the Joint Book of Documents.

30. A copy of a document entitled "Second Amended Statement of Adjustments", which is located at Tab 30 of the Joint Book of Documents, indicates that the sale by the Appellant to Venneri closed on November 22, 1991 at a purchase price of $580,000.

E. Lot 66 - Purchaser - Marton

31. On February 7, 1989, the Appellant and Mario and Maria Marton (the "Martons") entered into an agreement of purchase and sale, which referred to house type 3570, to Lot 117 of the draft plan, and to a purchase price of $670,000. A copy of the agreement of purchase and sale is located at Tab 31 of the Joint Book of Documents.

32. On March 16, 1989, the Appellant and the Martons entered into an agreement of purchase and sale, which referred to house type 4205, Elevation A, to Lot 147 of the draft plan, and to a purchase price of $800,000. A copy of the agreement is located at Tab 32 of the Joint Book of Documents.

33. On August 31, 1989, the Appellant and the Martons signed a document entitled "Amendment to Agreement of Purchase and Sale", which deleted the reference to Lot 147 and replaced it with a reference to Lot 57 Vaughan Mills Road in the Town of Vaughan (final plan) ("The Manchester", Elevation "A"), deleted the reference to a purchase price of $800,000 and replaced it with a reference to a purchase price of $825,000, and inserted a reference to a walk-out basement. A copy of the document is located at Tab 33 of the Joint Book of Documents.

34. On August 27, 1990, the Appellant and the Martons entered into an agreement of purchase and sale, which referred to house type "The Windsor Revised, Elevation A", to Lot 66 Jolana Court, Woodbridge of the final plan, and to a purchase price of $649,000. The closing date was set as December 28, 1990. A copy of this agreement is located at Tab 34 of the Joint Book of Documents.

35. On November 27, 1990, the Appellant and the Martons signed a document entitled "Amendment to Agreement of Purchase and Sale", which deleted the reference to the closing date of December 28, 1990 and replaced it with a reference to a closing date of March 15, 1991. A copy of this document is located at Tab 35 of the Joint Book of Documents.

36. The sale by the Appellant to the Martons closed on March 12, 1991. A copy of a Statement of Adjustments (Amended 03/11/91) is located at Tab 36 of the Joint Book of Documents.

F. Lot 46 - Purchaser - Valente

37. On February 21, 1989, the Appellant and Sylvia Valente ("Valente") entered into an agreement of purchase and sale, which referred to house type 3570, Elevation A, to Lot 137 of the draft plan, and to a purchase price of $695,000. A copy of the agreement of purchase and sale is located at Tab 37 of the Joint Book of Documents.

38. On August 22, 1989, the Appellant and Valente signed a document entitled "Amendment to Agreement of Purchase and Sale", which deleted the reference to Lot 137, Type 3570 and replaced it with a reference to Lot 49 Jolana Court (final plan) - "The Silverthorne" Elevation A. A copy of this document is located at Tab 38 of the Joint Book of Documents.

39. On June 5, 1991, the Appellant and Valente signed a document entitled "Amendment to Agreement of Purchase and Sale", which, inter alia, deleted the reference to Lot 49 Jolana Court and replaced it with a reference to Lot 46 Jolana Court (on final plan), deleted the reference to a purchase price of $695,000 and replaced it with a reference to a purchase price of $390,000, deleted the reference to "The Silverthorne" Elev. A and replaced it with a reference to Type 3435 Elev. "A", and inserted a closing date of August 31, 1991. A copy of this document is located at Tab 39 of the Joint Book of Documents.

40. On June 15, 1992, the Appellant and Valente signed a document entitled "Amendment to Agreement of Purchase and Sale", which, inter alia, deleted the reference to a closing date of August 31, 1991 and replaced it with a reference to a closing date of September 12, 1992 and deleted the reference to a purchase price of $390,000 and replaced it with a reference to a purchase price of $370,000. A copy of this document is located at Tab 40 of the Joint Book of Documents.

Analysis

[5] The relevant provisions of the Act relating to this issue are found in subsection 336(2) which reads:

336(2) Where

(a) a taxable supply by way of sale of a single unit residential complex in Canada is made to an individual under an agreement in writing entered into before October 14, 1989 between the supplier and the individual,

(b) ownership and possession of the complex are not transferred to the individual under the agreement before 1991, and

(c) possession of the complex is transferred to the individual under the agreement at any time after 1990,

the following rules apply:

(d) no tax is payable by the individual in respect of the supply,

...

[6] With respect to each of the properties in issue, the Appellant entered into an agreement of purchase and sale prior to October 14, 1989. In each case, after October 14, 1989, the Appellant and the purchaser "amended" each of the agreements to varying degrees. The issue is whether these were in fact amendments or whether they constituted new agreements entered into after October 14, 1989 in which case subsection 336(2) of the Act does not apply and the Appellant must pay GST on the sale of these units.

[7] Counsel for the Appellant contends that in each case, all of the documents together, i.e. the agreements and all the amendments thereto support the conclusion that the intention of the parties remained consistent which was to permit the purchaser to remain the same, the vendor to remain the same and to complete a transaction involving a piece of land on which a particular home would be constructed. More specifically, in the Yannuzzi and Dolan transactions the Appellant says that the property conveyed, following a series of amendments, was the same piece of land that the parties contracted to convey prior to October 4, 1989. With respect to Dolan, Sgro, Venneri and Valente, the sale of the property in each case proceeded by way of a contractual string of documents which affirmed the original pre-October 14, 1989 agreement.

[8] Counsel for the Appellant submitted that the common law view that every piece of real estate is unique was no longer valid in an age where residential, business, and industrial properties are mass produced and argued that the amendments in each of the six transactions clearly contemplated the continuance of the original agreement.[1]

[9] The Appellant also says it paid federal sales tax (FST) of 12% on all material used to construct the Yannuzzi, Dolan, Marton and Valente homes and argued that to require it to now pay GST on these homes in effect requires it to pay both FST and GST on the same transactions which is contrary to the express intention of subsection 336(2) of the Act. Counsel for the Appellant submitted that the language used in subsection 336(2) is clear to the extent that if there is an agreement in writing prior to October 14, 1989, there is no GST. However, counsel further submitted that if Parliament had wanted taxpayers to be burdened with the application of GST or as in this case, double tax, then it could have done substantially more in terms of clarifying the meaning of "agreement in writing". Parliament chose not to, and thus it is the Appellant's position that the legislation is not clear, certain and unambiguous. The Appellant therefore takes the position that to the extent there is ambiguity as to the applicability of subsection 336(2) to the circumstances, such ambiguity is to be resolved in favour of the taxpayer.

[10] The Respondent's position is that the supply of each of these six homes was made under agreements that were entered into after October 14, 1989. In each case, the parties entered into agreements and renegotiated purchase prices after the release of the draft GST legislation. In certain instances, provision was specifically made as to which of the parties would be responsible for payment of GST. This it was argued, is inconsistent with the rationale underlying subsection 336(2) which specifically considers the inequity of applying GST when the purchase price is negotiated before the release of the draft GST legislation. The Respondent further contends that the amendments in each case were made to fundamental terms of the agreements which went beyond minor changes to the original agreements of purchase and sale.

Conclusion

[11] The terms "single unit residential complex", "residential complex" and "residential unit" are defined in subsection 123(1) of the Act. It is clear from those definitions that a "residential complex" and thus a "single unit residential complex" is comprised of two elements: a building and the land that is sub-adjacent and immediately contiguous to the building that is reasonably necessary for the use and enjoyment of the building. The land is an integral and necessary component of a residential complex.

[12] It is trite law that the three essential terms of an agreement for the purchase and sale of real property are the parties, the property and the price. Thus an agreement of purchase and sale must contain a description sufficient to identify the property that is being purchased, e.g. the lot and plan number or the municipal street address. The agreements of purchase and sale with respect to the six individuals clearly indicate that the Appellant was not merely constructing the houses but rather was selling real property described in the agreements as "the land and the dwelling". Each purchaser selected a particular lot from the site plan, a copy of which was attached as a schedule to the agreement of purchase and sale. From the evidence, particularly that of Peticca it is clear that the location and size of the lots was most important to each of the purchasers. Although the initial agreements provided that lot sizes or dimensions were subject to change without notice provided they were not substantially varied, the agreements did not provide for the substitution of one lot with another.

[13] With specific reference to each of the purchases, I make note of the following:

A. Purchaser – Yannuzzi

This was the only transaction of the six where the lot remained the same. However, the agreement entered into on August 21, 1990 was for the construction of a much smaller residence with a different floor plan at a price of $525,000 (approximately $105,000 less than the residence previously contracted for). More to the point, the August 21, 1990 agreement expressly stated that "acceptance of this agreement of purchase and sale shall act as a release of the previous agreement dated March 1, 1989". The August 21, 1990 agreement also expressly provided that if any GST becomes payable, the vendor agrees to indemnify the purchaser in respect thereof.

B. Purchaser – Dolan

The Appellant's position is that the lot initially contracted for was the same lot that was eventually conveyed by the Appellant to Dolan. The testimony of Peticca in support of this proposition was unresponsive and in general, not convincing. On balance, the lot descriptions and the March 1989 agreement lead me to the conclusion that a residence to be constructed on Lot 123 (of the draft plan, later 63 Jolana Court) was the subject of the initial agreement. The subsequent agreement entered into in September 1990 was with respect to the construction of a residence at 64 Jolana Court at a substantially reduced price, changed features and contemplated that the Appellant would be responsible for GST if the sale closed on or after January 1, 1991.

C. Purchaser – Sgro

The March 1989 agreement between the Appellant and Sgro was for the construction of a residence on Lot 68 of the draft plan (subsequently Lot 123, Longview Crescent) at a price of $738,000. At some point of time thereafter when the real estate market changed, further negotiations ensued, apparently at Sgro's behest. These negotiations reached an impasse and litigation was threatened by the Appellant. According to Peticca, a settlement was reached as a result of which in April 1991, the parties signed an agreement which provided for the construction of a residence with substantially revised design features on a smaller lot located on a different street than that previously agreed to. The agreement also provided for a reduced purchase price of $440,000.

D. Purchaser – Venneri

In February 1989, Venneri agreed to purchase a 4,200 sq. ft. residence to be constructed on 62 Jolana Court at a price of $740,000. In July 1990, the Appellant and Venneri entered into a further agreement which, inter alia, increased the size of the residence to 5,100 sq. ft. and the price to $750,000. A closing date of November 30, 1990 was set. In September of that year, Venneri informed the Appellant that he had no intention of closing on this transaction. The Appellant's solicitor communicated with Venneri's solicitor and indicated that it took the position that he had repudiated the contract and as such forfeited his deposit. The Appellant further indicated that it was under no further obligation to proceed with the construction of any dwelling. In October 1990, Venneri commenced a legal proceeding against the Appellant seeking, inter alia, a return of the deposit paid. The Appellant both defended itself and filed a counterclaim. In May 1991, the litigation was settled and, it would appear, as part of the settlement the Appellant and Venneri entered into an agreement by virtue of which Venneri would purchase a residence to be constructed at 60 Jolana Court at a price of $614,000 (subsequently reduced to $580,000). Peticca agreed that by virtue of the settlement the parties to the litigation released each other of all their obligations under the prior agreements, and more specifically, there was to be no further attempt by either of the parties to pursue their rights under the agreements dated prior to May 1991. As previously noted there was no FST content relating to the sale of this property.

E. Purchaser – Marton

The initial agreement of purchase and sale was entered into on March 16, 1989. An "amendment" to that agreement dated August 31, 1989 set the purchase price at $825,000 for a residence described as the Manchester to be constructed on Lot 147. On August 27, 1990, the parties entered into another agreement which expressly released the parties from their respective obligations under the March 16, 1989 agreement and provided for the construction of a smaller residence (the Windsor) located on a different street at a substantially reduced price of $649,000. This agreement also addressed the Appellant's responsibility for payment of GST if that became necessary.

F. Purchaser – Valente

The June 5, 1991 "amendment to the agreement of purchase and sale" discloses that a different lot was being purchased, that there were substantial changes to the design and features of the home to be built and that the purchase price was to be reduced from $695,000 to $390,000 (subsequently reduced to $370,000). As well, the auditor, Young, testified that the Appellant claimed an input tax credit (ITC) in its GST return for the reporting period ending August 30, 1993 in respect of the assignment of a new GST housing rebate between Valente and the Appellant.

[14] I have concluded that in each of the transactions, the fundamental elements of price, lot, and features were at the root of the initial contracts and that by entering into new agreements after October 14, 1989 the parties intended to rescind the previous contract and to have substituted a new one. The conclusion to be drawn from the evidence regarding each of the post-October 14, 1989 contracts is that it was only at that point of time that rights and obligations were created between the parties with respect to the specific and particular properties that were ultimately sold to each of the purchasers by the Appellant. In the case of Yannuzzi, Marton and Venneri, the conclusion that the subsequent agreement was intended to replace the earlier one is supported by the fact that the parties in clear and unambiguous language released each other from the original agreements and that the subsequent contracts in all likelihood would have been a good defence to any action brought upon the first one. I am unable to accept Peticca's explanation that in these cases the Appellant was merely "releasing them of the particular previous lot and previous model type". His testimony in this regard was questionable and in fact was to some extent, contradicted by statements he made on examination for discovery.

[15] The Appellant has consistently maintained it did not intend that the subsequent agreements were to terminate or abrogate the prior contracts. It is not the intention of the Appellant that is relevant but rather the intention of the parties. It was open to the Appellant to adduce evidence from some or all of the purchasers to support its position. Failure to do so in light of the facts can only lead to a negative inference. On the evidence before me, I have concluded that it was only at the point of time that the final agreement entered into in each instance that rights and obligations were created between the parties with respect to the specific and particular properties, and the consideration therefor, that were ultimately sold to each of the purchasers by the Appellant.

[16] The Appellant's submission that subsection 336(2) of the Act is ambiguous or lacks clarity is not well founded. Furthermore, although there is little dispute that it would be contrary to the intention of subsection 336(2) that a purchaser of a home pay GST if the purchase price already reflects FST, that is not what occurred in the six transactions in issue. With respect to the Venneri and Sgro properties, the Appellant conceded they had no FST content. As for the Yannuzzi, Dolan, Valente and Marton transactions, it is reasonable to infer that the initial contract entered into prior to April 14, 1989 included a consideration of FST in the price. The evidence also establishes that the prices negotiated in the post-April 14, 1989 contracts clearly and specifically reflected a consideration of the GST element. The Appellant knew that GST might be payable on those sales and agreed that in such an event, it would be responsible to pay it.[2] That being the case, it would not be contrary to the intention of subsection 336(2) that the Appellant pay GST, even if the original price included FST.

[17] With respect to the Appellant's submission that it faces double taxation, I must observe that this did not result solely from the fact that the Minister failed to assess prior to 1995. When the Appellant negotiated new contracts with Yannuzzi, Dolan, Venneri and Marton, it was aware of the impact of the proposed GST and indeed provided for its possible application with respect to these contracts. It is equally reasonable to assume that the Appellant was aware of the rebate provisions found in subsection 121(4) of the Act. Nonetheless, it proceeded on the questionable basis that no GST was payable with respect to these four properties and ultimately found itself statute-barred from seeking recovery of the FST payment. While one can readily sympathize with the Appellant's dilemma, this Court has no authority to allow the appeal from the imposition of GST on the basis of fairness in order to compensate for the "double payment of tax".

[18] The Appellant has failed to establish on a balance of probabilities that the supply of each of the particular single unit residential complexes in issue was made under agreements which were entered into before October 14, 1989 and accordingly, cannot succeed in its appeal with respect to these six transactions.

Issue 2: Were certain homes more than 90% complete on January 1, 1991 and therefore subject to GST at the rate of 0% pursuant to paragraph 336(2(g) of the Act?

[19] During the relevant period the Appellant sold the following homes under the following circumstances:

(A) Lot 55 – Purchaser – Pellegrino

41. On March 7, 1989, the Appellant and Vincenzo Pellegrino ("Pellegrino") entered into an agreement of purchase and sale, which referred to house type 3310, Elevation, to Lot 131 of the draft plan, and to a purchase price of $670,000. A copy of this agreement of purchase and sale is located at Tab 41 of the Joint Book of Documents.

42. On August 22, 1989, the Appellant and Pellegrino signed a document entitled "Amendment to Agreement of Purchase and Sale", which deleted the reference to Lot 131, Type 3310 and replaced it with a reference to Lot 55 Jolana Court (final plan) – "The Appleby", Elevation "A". A copy of this document is located at Tab 42 of the Joint Book of Documents.

43. In a letter to Pellegrino dated October 2, 1990, Vince Peticca wrote, inter alia, that building permits were now available for construction on Lot 55 and that completion of the dwelling and the closing date for Pellegrino's purchase was fixed by the Appellant for January 18, 1991. A copy of this letter is located at Tab 43 of the Joint Book of Documents.

44. On or about October 17, 1990, the Appellant and Pellegrino signed a document entitled "Amendment to Agreement of Purchase and Sale", which deleted the reference to Lot 131, Type 3310 and replaced it with a reference to Lot 55 Jolana Court – "The Wellington, Elevation "A". A copy of this document is located at Tab 44 of the Joint Book of Documents.

45. A footing subgrade inspection of Lot 55 Jolana Court was conducted on October 19, 1990. A copy of the report of this inspection, dated October 23, 1990, is located at Tab 45 of the Joint Book of Documents.

46. A building permit for Lot 55 was issued by the Town of Vaughan on November 27, 1990. A copy of the building permit is located at Tab 46 of the Joint Book of Documents.

47. On January 24 and January 8, 1991, Pellegrino's lawyer and Mr. Peticca exchanged correspondence with respect to, inter alia, changing the closing date from January 18, 1991 to March 28, 1991 and reducing the purchase price from $670,000 to $535,000. A copy of this correspondence is located at Tab 47 of the Joint Book of Documents.

48. On April 9, 1991, counsel for the Appellant sent a letter to Pellegrino's lawyer, in which the Appellant's counsel stated, inter alia, that the dwelling on Lot 55 was "substantially completed". A copy of this letter is located at Tab 48 of the Joint Book of Documents.

49. A provisional occupancy certificate was issued for Lot 55 on April 22, 1991. A copy of this certificate is located at Tab 49 of the Joint Book of Documents.

50. On April 22, 1991, counsel for the Appellant sent a letter to Pellegrino's counsel confirming, inter alia, that the purchase price was reduced to $510,000 and that the new closing date was June 14, 1991. A copy of this letter is located at Tab 50 of the Joint Book of Documents.

(B) Lot 89 – Purchaser – Colarieti

51. On August 11, 1989, the Appellant and Sandro Colarieti ("Colarieti") entered into an agreement of purchase and sale, which referred to house type "The St. Andrews, Elevation A", to Lot 89 Longview Crescent, and to a purchase price of $655,000. A copy of the agreement of purchase and sale is located at Tab 51 of the Joint Book of Documents.

52. On July 13, 1990, the Appellant and Colarieti signed a document entitled "Amendment to Agreement of Purchase and Sale", which, inter alia, deleted the reference to a purchase price of $655,000 and replaced it with a reference to a purchase price of $615,000, inserted a closing date of October 31, 1990 and inserted a provision that in the event the closing date was on or after January 1, 1991, the Appellant agreed to pay for the new proposed goods and services tax after taking into account all tax credits received by Colarieti. A copy of this document is located at Tab 52 of the Joint Book of Documents.

53. A building permit for Lot 89 was issued by the Town of Vaughan on October 19, 1990. A copy of the building permit is located at Tab 53 of the Joint Book of Documents.

54. On October 19, 1990 and again on October 22, 1990, a footing subgrade inspection was conducted for Lot 89. A copy of the reports, dated October 23, 1990 and November 6, 1990 respectively are located at Tabs 54 and 55 of the Joint Book of Documents.

55. On October 30, 1990, the Appellant and Colarieti signed a document entitled "Amendment to Agreement of Purchase and Sale", which deleted the reference to a closing date of October 31, 1990 and replaced it with a reference to a closing date of February 28, 1991. A copy of this document is located at Tab 56 of the Joint Book of Documents.

56. On October 30, 1990, the Appellant and Colarieti also entered into an agreement, wherein the Appellant acknowledged that the house to be built for Colarieti on Lot 89 would not be fit to occupy by the agreed upon closing date of October 31, 1990 and that in consideration of Colarieti agreeing to extend the closing date to February 28, 1991, the Appellant agreed to permit Colarieti to occupy its completed model house at Lot 73, Thompson Creek Boulevard from November 1, 1990 until the new house was ready to occupy. A copy of this agreement is located at Tab 57 of the Joint Book of Documents.

Analysis

[20] During the transitional phase between the GST and the FST, the rate of GST depended upon the state of completion of the residential complex on January 1, 1991. Subsection 336(2) of the Act provides that:

336(2) Where

(a) a taxable supply by way of sale of a single unit residential complex in Canada is made to an individual under an agreement in writing entered into before October 14, 1989 between the supplier and the individual,

(b) ownership and possession of the complex are not transferred to the individual under the agreement before 1991, and

(c) possession of the complex is transferred to the individual under the agreement at any time after 1990,

the following rules apply:

(d) no tax is payable by the individual in respect of the supply,

...

(g) the supplier shall be deemed to have collected, at that time, tax in respect of the supply equal to

(i) 4% of the consideration for the supply where the complex was, on January 1, 1991, not more than 20% completed,

(ii) 2.5% of the consideration for the supply where the complex was, on January 1, 1991, more than 20% completed and not more than 60% completed,

(iii) 1% of the consideration for the supply where the complex was, on January 1, 1991, more than 60% completed and not more than 90% completed, and

(iv) 0% of the consideration for the supply where the complex was, on January 1, 1991, more than 90% completed, and

(h) ...

The Minister's assessment in this case was made on the basis that on January 1, 1991, the Pellegrino complex was more than 60% but not more than 90% completed while the Colarieti complex was more than 20% but not more than 60% completed.

[21] The only evidence adduced on behalf of the Appellant was the testimony of Peticca. He said he was certain that both of the complexes in issue were 90% complete by January 1, 1991 because the Appellant was under a contractual obligation to complete them by that date otherwise it would have been in breach of contract and the purchasers could have voided the transaction. He further said that as of that date all that remained to be completed was the "finishing work" such as touch-ups, final trim and the hook-up of plumbing fixtures which represented less than 1% of the total work.

[22] Counsel for the Appellant submitted that the Minister's assessment was based on flawed methodology in that the analysis conducted by the auditor was not performed on site and was based solely on a "paper analysis of invoices" which did not indicate when the work was completed but merely reflected the date on which the invoices were rendered. Furthermore counsel argued that this information was "not shared with Peticca at the time of the investigation, thus depriving him of the opportunity to then explain any errors in the analysis".

[23] The Appellant also contends that the manner in which the Minister calculated the percentage of completion of the two properties was inconsistent in that in one instance he included invoices received up to April 1991 while the other reflected invoices received prior to March 1991. The Appellant further submitted that the auditors used only one of three available methods to determine the percentage of completion and, more specifically, the one used failed to include "capital costs" incurred in the construction.

[24] The Respondent's position is that the percentage of completion with respect to each complex was determined by the auditors and the appeals officer based on a review of the dates and amounts of invoices obtained from the Appellant's cost ledger. Counsel further contends that although requests for further information were made by the auditors the Appellant provided no documentation to substantiate a degree of completion.

[25] This issue is purely a question of fact. It is the Appellant's responsibility to establish on a balance of probabilities the percentage of completion. That has not been done. The Appellant relied almost exclusively on Peticca's assertion, unsupported by any documentation, that the houses were 90% complete as of January 1, 1991. Counsel for the Appellant argued that Peticca's testimony to the effect that:

The homes were completed by those particular dates because the builder had to guard itself against giving the purchaser a defence, a way to get out of the transaction. As a result, he was quite certain that they were completed to the percentage that he said ... .

was uncontradicted and ought to be accepted. I am unable to agree.

[26] The initial audit with respect to these two properties was conducted by Ing. He was given unfettered access to the Appellant's records and in particular to what he described as the Appellant's ledger of total construction costs. Ing explained that with respect to Lot 55 (Pellegrino), he computed the percentage of completion to be 38% based on the amounts and dates of the actual purchase invoices posted in the Appellant's ledger to the end of 1990. Upon review by the appeals officer, Young, all January and February 1991 invoices were factored into the calculation on the assumption that completed work had been billed to the Appellant in subsequent months. As a result the percentage of completion at January 1, 1991 was ultimately assessed to be 57%. In the course of cross-examination, Ing conceded that had invoices received by the Appellant in March 1991 been included in his computation (as they had been with respect to Lot 89), the percentage of completion might well have been in excess of 60% but nonetheless, less that 90%. With respect to the residence at Lot 89 (Colarieti), Ing, based on the Appellant's ledgers, determined that the percentage of completion was 68%. In so doing, he took into account all invoices recorded in the Appellant's ledger prior to January 1, 1991 as well as those recorded in January, February and March 1991. I must observe at this point that no exception was taken with respect to the accuracy of the foregoing calculations by Ing.

[27] I have concluded that the Appellant has not established that the percentage of completion with respect to these two residential complexes was more than 90% on January 1, 1991. In the course of the audit, the Appellant was asked to produce completion certificates and any other information to substantiate its position. No such material was forthcoming although it would seem that a good deal of information might have been available to the Appellant, such as building inspector's reports, Hudac inspection dates and reports, etc. Furthermore, although Peticca maintained that the Appellant was virtually in a position to close as at January 1, 1991, it is a fact that with respect to Lot 55, the provisional occupancy certificate was not issued until April 22, 1991 and with respect to Lot 89, not until August 1991. Indeed, in the latter case, the Appellant sought and obtained an extension of time from the purchaser within which to complete the construction. Peticca's testimony was on the whole not convincing and in the absence of any substantive supporting evidence, it is difficult to accept his assertion that all that remained to be completed was the "finishing work".

[28] In the course of the testimony, it appears to have been conceded by the Respondent that with respect to Lot 55 (Pellegrino) had invoices received by the Appellant in March 1991 been included (as they were with respect to Lot 89), the assessment might readily have been made on the basis that the percentage of completion was in excess of 60%. I see no reason to differentiate between the two properties and accordingly, with respect to Lot 55, the appeal will be allowed on the basis that the complex was on January 1, 1991 more than 60% completed and not more than 90% completed.

Issue 3: Rental of house prior to 1991 - Was the home in question leased or occupied prior to January 1, 1991 and, therefore, not subject to GST on the subsequent sale thereof?

[29] With respect to this transaction, the following facts have been accepted by both parties.

57. On October 2, 1990, the Appellant sent a letter to Jean Tolfo, who had previously entered into an agreement to purchase a house to be built on Lot 70, notifying Ms. Tolfo that building permits were now available for the construction of the dwelling and that the completion of the dwelling and the closing date was fixed by the Appellant for December 7, 1990. A copy of this letter is located at Tab 58 of the Joint Book of Documents.

58. On October 4, 1990, the Appellant sent a letter to Jean Tolfo and Vince Guido confirming their meeting on October 3, 1990 whereby Ms. Tolfo and Mr. Guido had given the Appellant permission to select all of the interior colours on Lot 70. A copy of this letter is located at Tab 59 of the Joint Book of Documents.

59. On November 16, 1990, the Appellant's lawyer sent a letter to Ms. Tolfo's counsel, in which the Appellant's lawyer stated, inter alia, that the property (i.e. Lot 70) was used prior to its completion for some filming and advertising purposes. A copy of this letter is located at Tab 60 of the Joint Book of Documents.

60. On November 16, 1990, the Appellant's lawyer also sent a letter to Mr. Wisebrod of Bratty and Partners, in which the Appellant's lawyer notified Mr. Wisebrod that the closing of the sale of Lot 70 to Tolfo/Guido was scheduled for December 7, 1990. A copy of this letter is located at Tab 61 of the Joint Book of Documents.

61. A provisional occupancy certificate was issued by the Town of Vaughan for Lot 70 on November 30, 1990. A copy of this certificate is located at Tab 62 of the Joint Book of Documents.

62. On December 3, 1990, the Appellant sent a letter by registered mail to each of Jean Tolfo and Vince Guido, in which the Appellant confirmed that a Hudac inspection date of December 6, 1990 was scheduled to complete and sign a certificate of completion and possession form. Copies of the letters, dated December 3, 1990, and the Canada Post receipts indicating the letters were mailed December 4, 1990, are located at Tabs 63 and 64 respectively of the Joint Book of Documents.

63. On February 9, 1991, the Appellant and Enzo Tirone, a new purchaser, entered into an agreement of purchase and sale, which referred to Lot 70, to house type "Appleby", to a purchase price of $480,000, and to a closing date of April 30, 1991.

[30] During the relevant period, section 191 of the Excise Tax Act read:

191(1) For the purposes of this Part, where

(a) the construction or substantial renovation of a residential complex that is a single unit residential complex or a residential condominium unit is substantially completed,

(b) the builder of the complex

(i) gives possession of the complex to a particular person under a lease, licence or similar arrangement entered into for the purpose of its occupancy by an individual as a place of residence and the particular person is not a purchaser under an agreement of purchase and sale of the complex, or

(ii) where the builder is an individual, occupies the complex as a place of residence, and

(c) the builder, the particular person or an individual who is a tenant or licensee of the particular person is the first individual to occupy the complex as a place of residence after substantial completion of the construction or renovation,

the builder shall be deemed

(d) to have made and received a taxable supply by way of sale of the complex, and

(e) to have paid as a recipient and to have collected as a supplier, at the later of the time the construction or substantial renovation is substantially completed and the time possession of the complex is so given to the particular person or the complex is so occupied by the builder, tax under this Division in respect of the supply, calculated on the fair market value of the complex at that time.

Emphasis added

The purpose of section 191 is to ensure that GST applies to newly constructed or substantially renovated premises when they are rented or otherwise occupied as places of residence before being sold since the subsequent sale of such a residence will generally be exempt as used housing. Section 191 provides that in such instances, the builder of a residential complex is treated as having sold and repurchased the complex and as a result, is required to account for GST on the fair market value of the complex.[3] Section 4 of Schedule V of the Act exempts the sale of a single unit residential complex where the sale is made by the builder and the builder has previously self-supplied under section 191 in respect of the complex, provided the builder did not claim an ITC after the self-supply.[4] Under section 14 of Schedule V, the self-supply rules to section 191 are deemed to have been in force at all times before 1991 for the purposes of determining whether a sale of a residential complex constitutes an exempt sale of a "used" premises under section 4 of Schedule V. As a result, a residential complex that was constructed and occupied prior to 1991 is generally exempt when sold after 1990.

[31] The Appellant contends that the home on Lot 70 was leased and occupied prior to the January 1, 1991 effective date of the GST with the result that no taxes were payable on the subsequent sale to Tirone in February 1991. The Minister's position is that Lot 70 was not so leased or occupied and further takes the position that the exemptions in sections 4 and 14 were not available to the Appellant.

[32] Peticca testified that the closing of the sale of a residence constructed on Lot 70 for Jean Tolfo and Vince Guido was initially scheduled for December 7, 1990. However, he says, at some point of time before that the Appellant was advised that the purchasers would not be in a position to close and as a result "in the middle of 1990" the house was leased to a film company for a period of approximately four to six weeks during which it was used and occupied by a film crew. According to Peticca, they "brought in their own furniture, threw some carpet down on the floor and made it look like it was 100% complete, when in fact it was just plywood floors and unpainted walls and no furniture. It was amazing what they did with it with the intention to portray it as a residence in a film that was being produced." Peticca also asserted that the film crew "stayed in the basement overnight and had lunches there and dinners and so on". When the filming was completed, construction was resumed and according to Peticca was completed by the beginning of December 1990, other than for some exterior grading and sodding. He further said that on September 9, 1990 in view of the purchaser's inability to complete, the Appellant entered into an arrangement with one John Clubine to lease the property for six months commencing November 1, 1990 at $1,500 per month.[5]

[33] The Appellant's position is based almost exclusively on the testimony of Peticca. Several factors lead me to reject the Appellant's position. First, entering into the Clubine lease in September was inconsistent with its conduct at that time with respect to the Tolfo/Guido sale. On October 2, 1990, the Appellant advised the purchasers that completion of the dwelling and the closing date was fixed for December 7, 1990. On October 3, 1990, Tolfo and Guido met with the Appellant and gave it permission to select the interior colours.[6] On November 16, the Appellant's solicitors acknowledged receipt of a letter dated November 1, 1990 from the purchaser's solicitors and confirmed that the property had been used prior to its completion for filming and advertising purposes. This letter went on to state that the dwelling would be completed on the scheduled closing date and concluded: "Kindly let us know the manner in which your clients will be taking title. We will provide you with a draft transfer and statement of adjustments prior to closing." The provisional occupancy certificate was obtained by the Appellant on November 30, 1990 and on December 3 of that year, Peticca forwarded letters to Tolfo and Guido stating "As per our conversation of today's date, this is to confirm that a HUDAC inspection date of December 6, 1990 at 10:00 a.m. is scheduled to complete and sign Certificates of Completion and Possession form". Although there may have been cause for concern regarding the purchaser's ability to close I find it inconceivable that the Appellant would have jeopardized the sale (and its claim to the deposit) by permitting Clubine to take possession of the residence on November 1, 1990.

[34] The submission of Appellant's counsel implied, albeit obliquely, that a negative inference should be drawn from the fact that the auditor, Ing, made no effort to test the veracity of Peticca's testimony by locating Clubine even though he had an address and telephone number for him. In light of the evidence before the Court, this submission is, to say the least, surprising. Peticca said that he had no firsthand knowledge of the circumstances in which the "lease" was prepared since he had never dealt with Clubine. In fact he observed that Clubine was a complete stranger to everyone at Sir Wynne. Furthermore, he had no recollection of signing the lease and did not recall having any discussions with Favia regarding it but presumed that he "must have done so in order to have signed it". Although Peticca maintained that the Appellant received the rental payments as required, it was unable to comply with an undertaking to produce copies of the rent cheques or other entries in the Appellant's books indicating when they might have been received or deposited. Two further comments. First, there is no independent proof that the subject property was ready for occupancy on or before November 1, 1990 and second, with respect to the lease itself there is no identification of the property which is alleged to be the subject of the lease. This is of some relevance since, as counsel for the Respondent observed, the Appellant had several model homes available and a practice of leasing them on occasion. In actual fact, there was no testimony adduced from which one could assume that Clubine had in fact occupied this particular complex as a place of residence as contended by the Appellant.

[35] With respect to the Appellant's failure to call Clubine or Flavia,[7] its position is that it had fulfilled its obligation to adduce evidence under oath, i.e. by calling Peticca, and implied that nothing further was required. Given the circumstances, this position is simply unacceptable. Favia was the Appellant's agent and was the person who allegedly dealt with Clubine with respect to the lease. The Appellant's failure to call him (and/or Clubine) can only lead to the conclusion that their evidence would have been of no assistance to it.

[36] The evidence as a whole fails to support the Appellant's position and accordingly, it cannot succeed with respect to this issue.

[37] I am also satisfied that the use of this property for the purposes of producing a film does not satisfy the provisions of section 191 which specifically requires that the lease, licence or other similar arrangement be entered into for the purpose of occupancy by an individual as a place of residence. Aside from the fact that the evidence suggests that the filming took place at least four to five months prior to the granting of the provisional certificate of occupancy, I am of the opinion that even if some members of the production staff involved in the filming had spent a few nights in the house, that does not amount to occupancy by an individual as a place of residence within the meaning of section 191 of the Act.

Issue 4: Payment for extension of closing date. Lot 55 – Purchaser – Pellegrino

[38] The parties are in agreement with respect to the following facts:

64. On June 13, 1991, Pellegrino's lawyer wrote a letter to the Appellant's lawyer requesting an extension of the closing date for a period of thirty days to July 15, 1991. A copy of the letter is located at Tab 65 of the Joint Book of Documents.

65. On June 14, 1991, Pellegrino's lawyer wrote a letter to the Appellant's lawyer confirming the agreement to extend the closing of the transaction to August 15, 1991 and enclosing a bank draft payable to the Appellant in the sum of $8,000, which the letter referred to as representing a non-refundable extension fee. A copy of the letter is located at Tab 66 of the Joint Book of Documents.

[39] The Appellant's position is that the $8,000 was charged to the purchaser to cover the Appellant's bank interest charges incurred by reason of granting an extension of the closing date. It says that this conclusion is consistent with the fact that the amount paid was subject to abatement at a specified rate reflecting the daily interest charge if the purchaser advanced the closing date. Accordingly, the Appellant's position is that the payment for extension constitutes a "financial service" pursuant to section 123 of the Act since in effect it was a payment in the nature of interest on a loan. Consequently, the payment constitutes an exempt supply pursuant to Schedule V, part VI, section 1.

The Law

[40] Pursuant to the Act all "financial services" provided by a person other than a financial institution are exempt.[8] The relevant provisions of subsection 123(1) of the Act defines "financial instrument" and "financial service" as:

"financial instrument" means

(a) a debt security,

(b) an equity security,

(c) an insurance policy,

(d) an interest in a partnership or trust or any right in respect of such an interest,

(e) a precious metal,

(f) an option or a contract for the future supply of a commodity, where the option or contract is traded on a recognized commodity exchange,

(g) a prescribed instrument,

(h) a guarantee, an acceptance or any indemnity in resepct of anything described in paragraph (a), (b), (d), (e) or (g), or

(i) an option or a contract for the future supply of money or anything described in any of paragraph (a) to (h);

"financial service" means

...

(c) the lending or borrowing of a financial instrument,

...

(f) the payment or receipt of money as dividends (other than patronage dividends), interest, principal, benefits, or any similar payment or receipt of money in respect of a financial instrument,

Emphasis added

[41] The Appellant's position that the "imposition" of the $8,000 payment was a financial service and was not a component of the supply for the purposes of GST is not supported by the facts or the relevant provisions of the Act.

[42] The substance of the agreement between the Appellant and Pellegrino is found in his solicitor's letter dated June 14, 1991.[9] The relevant portions read as follows:

This will confirm our telephone conversation of today's date wherein we agreed to extend the closing of this transaction to August 15, 1991, with all terms and conditions of the Agreement of Purchase and Sale, as amended by your letter dated April 22, 1991, to remain the same and time to remain of the essence.

We are pleased to enclose herewith our client's bank draft payable to Sir Wynn Homes Ltd. in the sum of $8,000.00 representing a non-refundable extension fee. We confirm that in the event our client closes the transaction prior to August 15, 1991, you shall abate the price herein by $129.00 per day from the date of closing to August 15, 1991.

I am satisfied that the "non-refundable extension fee" referred to in this agreement is not interest since the Appellant did not lend or advance, in any sense of the words, any money to the purchaser. The amount of $8,000 was determined by the parties to be the appropriate consideration to be paid to the Appellant for agreeing to extend the closing of the sale transaction. That this amount may have been calculated on the basis of bank interest does not alter the nature of the transaction. I am unable to conclude that in entering into this agreement, the Appellant was supplying a financial service within the meaning of subsection 123(1) of the Act.

Issue 5: Extras

[43] The parties agree that:

66. On November 15, 1990, November 20, 1990 and December 30, 1990, Giulio Bianchi, who had entered into an agreement to purchase a house to be built on Lot 91 Longview Crescent, ordered various extras. Copies of the order forms are located at Tabs 67, 68 and 69 respectively of the Joint Book of Documents.

[44] The Appellant contends that these extras were purchased prior to January 1, 1991 and, therefore, are not subject to GST. Counsel argued that the purchase of extra construction features after the signing of the original contract were clearly not included in the consideration paid but instead formed a separate sale. He further submits that the agreement lists all of the items that the purchaser received for the purchase price and that clause 11 of the agreement specifically contemplates that there will be extras. All of the items in issue were paid for on November 22, 1990.

[45] The Respondent's position is that the alleged separate supply of extras was an integral part of the overall supply of the single unit residential complex to the purchaser. Payment for those extras, although invoiced separately, forms part of the total consideration for the supply of the new home and must be taken into account in computing GST payable in respect of that supply.[10]

Conclusion

[46] The Appellant's position that the purchase of extra construction features after the signing of the original contract forms a separate sale for purposes of GST is not well founded. Peticca testified that when an agreement of purchase and sale was entered into the purchasers often desired to have additional features built into their home. In such instances, it was the Appellant's practice to quote a price for those extras which represented both the cost of the materials and the labour required with respect to their installation. In this particular transaction, the three purchase orders reflected upgrades and additions to the bathrooms and kitchen and a change from standard roofing material to hand split cedar shingle roofing.[11] The total cost of these extras was approximately $44,000.

[47] In my view, this was a compound supply and, as was observed by Rip J. in O.A. Brown Ltd.:

The fact that a separate charge is made for one constituent part of a compound supply does not alter the tax consequences of that element. Whether the tax is charged or not charged is governed by the nature of the supply. In each case it is useful to consider whether it would be possible to purchase each of the various elements separately and still end up with a useful article or service. For if it is not possible then it is a necessary conclusion that the supply is a compound supply which cannot be split up for tax purposes.

Each of the required extras was an integral part or component of a composite whole and thus constitute a single supply. I adopt the words of Rip J. that:

... Only taken together do they form a useful service. ... The alleged separate supplies cannot be realistically omitted from the overall supply and in fact are the essence of the overall supply. ...

A common sense evaluation of the service provided by the Appellant is that it was to construct a residence for the purchasers according to their requirements which included extras and upgrading. This specialized service constitutes a composite whole which for the purposes of this Act was correctly considered by the Minister to be a single supply.

Signed at Ottawa, Canada, this 28th day of January, 2000.

"A.A. Sarchuk"

J.T.C.C.

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