Date: 19980519
Docket: 96-2348-GST-G
BETWEEN:
CAMP KAHQUAH CORPORATION LIMITED,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for order
Bell, J.T.C.C.
[1] The Respondent has made a motion before the Court requesting an Order granting permission to the Respondent to amend the Reply and also for costs of the Motion.
FACTS
[2] The Appellant, Camp Kahquah Corporation Limited, appeals from a GST assessment evidenced by Notice of Assessment dated November 19, 1993 in respect of the Appellant's 1992 taxation year. The Appellant is a charity registered under the Excise Tax Act ("Act"). The Appellant operated a bible camp in which, in exchange for a fee, persons would receive accommodation, meals, educational activities, recreational activities and religious training. The Minister assessed the Appellant an amount of tax on the basis that the Appellant was providing a supply of taxable services which was not exempt pursuant to the Act. Specifically, the Minister alleged in the Notice of Decision (in response to a Notice of Objection filed by the Appellant), and in the Reply to the Notice of Appeal, that the Appellant was providing a supply of services involving instruction or supervision in a recreational or athletic activity which, pursuant to subsection 2(j) of Part IV of Schedule V of the Act, was specifically excluded from the general exemption for supplies made by a charity.
[3] In the Reply to the Notice of Appeal the Respondent states that in assessing the Appellant the Respondent relied upon a number of assumptions, two of which are paragraphs b) and c) as follows:
b) the Appellant offered and provided a variety of recreational/athletic camping opportunities in the Magnetewan, Ontario area within the context of an environment which was imbued with, and characterized by, Christian values and teachings (the "camping program"); and
c) the provision of the camping program was a supply made by the Appellant of a service involving supervision and instruction in a variety of recreational and athletic activities and was, therefore, a taxable supply for purposes of the Excise Tax Act.
The Reply further states that the Respondent relies, inter alia, on paragraph 2(j) of Part VI of Schedule V of the Act. The Appellant has taken the position that it is a charity providing exempt supplies as set out in Schedule V to the Act. Specifically, Schedule V, Part VI, section 2 includes:
A supply made by a charity of any personal property or a service.
[4] Section 2 includes a number of exceptions to that supply which would render a supply taxable. Specifically, the Respondent, in its Reply to the Notice of Appeal, relied upon section 2(j) which is:
(j) a service involving, or a membership or other right entitling a person to, supervision or instruction in any recreational or athletic activity;
[5] After the examinations for discovery the Respondent brought this motion and, in so doing, stated through counsel, that it had garnered new information on the examination for discovery entitling it to expand the grounds upon which the assessment could be supported. The proposed new paragraphs included in such amendment are as follows:
8. He states more particularly that the camping program consisted of recreational/athletic camping opportunities that were offered to:
(a) younger children ("Junior Children's Camp");
(b) older children ("Senior Children's Camp");
(c) teenagers ("Teen Camp");
(d) families/adults ("Family Camp");
(e) seniors/retirees ("Seniors' Retreat); and
(f) various groups during the off-season ("Off-season rentals").
9. With respect to the Junior Children's Camp, Senior Children's Camp, and Senior's Retreat, a single consideration was charged to each camper which covered meals, accommodation and use of the camp facilities.
10. He states that with respect to Family Camp, a registration fee was charged to campers and a separate consideration was charged for accommodation provided to campers, the amount of which varied according to the type of accommodation selected. A separate consideration was also charged for meals that might be supplied to campers by the Appellant.
[6] The Respondent seeks to add, as statutory provisions relied on, sections 2(e), 2(f), 2(m) and 25(f) of Part VI of Schedule V of the Act.
[7] Paragraph 14 of the Amended Reply reads as follows:
With respect to the Seniors’ Retreat and Off-season rentals, he submits in the alternative that if these supplies were not supplies of a service involving supervision and instruction in a recreational or athletic activity within the meaning of paragraph 2(j) of Part VI of Schedule V, they were supplies to each camper of an admission in respect of a place of amusement within the meaning of paragraph 2(m) of Part VI of Schedule V.
Section 2(m), being an exception to exemption from tax, reads as follows:
(m) an admission in respect of
(i) a place of amusement,
(ii) a seminar, conference or similar event where the supply is made by a university or public college, or
(iii) any fund-raising event held after April 1991.
[8] Paragraph 15 in the proposed Amended Reply reads as follows:
He submits in the further alternative with respect to the Seniors’ Retreat and Off-season rentals that these supplies were supplies of real property made by way of lease or license in the course of a business carried on by the Appellant within the meaning of paragraph 25(f) of Part VI of Schedule V, and of property made by way of lease, license or similar arrangement within the meaning of paragraph 2(f) of Part VI of Schedule V.
Section 2(f), being an exception to exemption from tax, reads as follows:
(f) property made by way of lease, licence or similar arrangement in conjunction with a supply of real property included in paragraph 25(f);
Section 25(f), being an exception to exemption from tax, reads as follows:
(f) real property (other than short-term accom-modation) made by way of
(i) lease, where the term of the lease is less than a month, or
(ii) a licence,
where the supply is made in the course of a business carried on by the body;
[9] Paragraph 16 of the proposed Amended Reply reads as follows:
With respect to the Family Camp, he submits in the alternative that if the consideration paid for the Family Camp was not consideration for a supply of a service involving supervision and instruction in a recreational or athletic activity within the meaning of paragraph 2(j) of Part VI of Schedule V,
a) the registration fee charged and the accommodation provided in the Family Camp constitute a supply of an admission in respect of a place of amusement within the meaning of paragraph 2(m) of Part VI of Schedule V, and alternatively a supply of real property, other than short-term accommodation, that is made in the course of a business carried on by the Appellant by way of lease or license within the meaning of paragraph 25(f) of Part VI of Schedule V, and of property made by way of lease, license or similar arrangement within the meaning of paragraph 2(f) of Part VI of Schedule V; and
b) the meals provided in the Family Camp are supplies of tangible property, and of services in respect of such property, within the meaning of paragraph 2(e) of Part VI of Schedule V.
Section 2(e) reads as follows:
(e) tangible property that was acquired, manufactured or produced by the charity for the purpose of making a supply of the property and was neither donated to the charity nor used by another person before its acquisition by the charity, or any service supplied by the charity in respect of such property, other than such property or such a service supplied by the charity under a contract for catering;
[10] The question for determination is whether the Respondent is entitled to amend the Reply to the Notice of Appeal so as to raise new legal grounds for the assessment of tax by the Minister and is whether, in so doing, the Respondent is raising new assumptions of fact upon which to base the assessment.
[11] The Notice of Motion was dated March 30, 1998 and filed in this Court on that date. The Appellant is not complaining about the length of time between service of same upon it and the hearing of the motion. It is clear that the Appellant had notice of the Respondent’s intention to raise alternative arguments. In a letter dated January 30, 1998, addressed to Appellant’s counsel by counsel for the Respondent, the following appears:
After having had an opportunity to review the Transcript of Larry Hogg’s Examination for Discovery and to consider the facts relating to the Appellant’s operations as disclosed on that Examination, we wish to correct what was stated in answer to Question 120 of the Transcript of the Examination of Ms. White. As the Examination of Larry Hogg made clear, the Appellant makes a number of different types of supplies which can be categorized as follows: Children’s Camp (Junior and Senior); Teen Camp; Family Camp; Senior’s Retreat (now Retirees’ Retreat); and Off-season rentals. The GST in respect of which the rebate in question was claimed appears to have been paid in respect of property or services acquired by the Appellant for consumption, use or supply in the course of making all of the 5 above-noted categories of supplies. If this is not the Appellant’s understanding, please let us know. Accordingly, we cannot agree with the suggestion made at page 75 of the Transcript of Mr. Hogg’s examination that the off-season rentals cannot be considered as relevant to the assessment under appeal.
In respect of the Family Camp, Senior’s Retreat and Off-season rentals, the Respondent intends to argue as an alternative argument that if these three categories of supplies are not within paragraph 2(j) of Schedule V Part VI, they are supplies within the meaning of paragraphs 2(f) and 25(f) of Schedule V Part VI, and accordingly are taxable supplies.
We intend to submit to you an Amended Reply containing these submissions in the near future, and intend to ask for your consent to the filing thereof.
Accordingly, there is no element of surprise to the Appellant with respect to the Respondent’s motion. Appellant’s counsel referred to Her Majesty the Queen v. McLeod, 90 DTC 6281. The Federal Court, Trial Division found an application by the Crown for leave to amend pleadings to be inappropriate. Collier, J., at 6284, said
... this general rule was qualified by the courts to the effect an amendment will be allowed only where it can be made without injustice to the other side. In general, amendments will be allowed only on such terms as are just, protecting the opposite party with respect to discovery and trial preparation and where any prejudice may be compensated by an order as to costs.
In this case, the learned justice went on to say:
The amendments to the Statement of Claim make new assumptions and raise new issues. They represent, in my view, a totally new reassessment from the one originally made. The plaintiff is statute barred from making another assessment because the four-year limitation period, for so doing, prescribed by paragraph 152(4)(b) of the Income Tax Act, has expired. The plaintiff is attempting to circumvent the limitation period by asking this Court to permit the amendment. The injustice, which would result, were I to grant the plaintiff its order, is obvious.
[12] I do not find the proposed additions to the Amended Reply under the heading STATEMENT OF FACTS to be contradictory to those stated in the original Reply. The assumptions of fact in that original Reply have not been negated or replaced. Paragraphs 8, 9 and 10 quoted above, simply expand those assumptions. Accordingly, the plaintiff cannot succeed in resisting the motion on this basis.
[13] Appellant’s counsel also referred to Lutheran Life Insurance Society of Canada v. The Queen, 91 DTC 5553. At 5572 the court, in respect of an alternative argument raised late in trial by counsel for the Queen, said:
This alternative argument I am not prepared to accept. There are procedural grounds for rejecting it in my view, related to the lack of reference to it in the pleadings or in the reassessments by the Minister. Moreover, it changes the very basis of the reassessments which make no reference to the fraternal assessments as income from insurance and it negates the basis on which the reassessments were made ... Further, subsection 152(5) of the Act, as it applied to the years in question, precludes the Minister from including amounts in the income of a taxpayer by issuing a reassessment, which would here be required to give effect to this alternative argument, more than four years from the date of the original assessment, which was September 9, 1982 for all three years in this case.
[14] I do not find that the proposed amendments to the Reply change the basis of the reassessments in the within appeal. They are simply an expansion of what was contained in the original Reply.
[15] Appellant’s counsel also referred to Klie v. M.N.R., 79 DTC 254, heard by the Tax Review Board. Counsel referred the Court to the following portion of the Reasons for Judgment:
The latitude given the Minister in pleading in the alternative, in my view, permits the Minister to plead only new facts which support his assessments. Although it may at times be difficult to draw the line, I do not believe that it is open to the Minister to introduce new facts in his pleadings which would radically change the legal basis of his reassessments. Fundamental changes in the pleadings which destroy, contradict or ignore the assumptions in which the assessments were originally made, could, in my opinion, result in changing an assessment which can only be effected by a reassessment.
Again, the Appellant is not assisted by this case with respect to this Motion. The changes in the pleadings do not “destroy, contradict or ignore the assumptions” in the original Reply. They simply, as stated above, expand same.
[16] In Vineland Quarries and Crushed Stone Ltd. v. M.N.R., 70 DTC 6043 (Ex.Ct.), Cattanach, J. said at 6045-6046:
As I understand the basis of an appeal from an assessment by the Minister, it is an appeal against the amount of the assessment. ... Here the Minister does not seek to increase the amount of the assessment. He seeks to maintain the assessment at the amount he assessed. However, by his amendment to his Reply he seeks to ensure that, if the Court should find that the basis of his assessment was wrong, he might then, pursuant to reference back, assess a considerably lesser amount on what he foresees the Court might say is the correct basis of assessment. ... This I think the Minister is entitled to do and accordingly I would allow the motion and permit the Minister to amend his Reply to the Notice of Appeal as requested.
[17] In Wiebe et al. v. M.N.R., 88 DTC 1234 (T.C.C.), affirmed 89 DTC 5179 (F.C.A.), the taxpayer was assessed by the Minister as owing an amount of tax on the basis that the taxpayer was a shareholder of a corporation which supplied him with benefits. The Minister moved to amend the Reply to the Notice of Appeal by alternatively pleading that the taxpayer was liable for tax on the basis of being an employee of the corporation and receiving income therefrom. In other words, the basis and reasons for imposing tax were different from the original assessment but the amount of tax had remained the same. Goetz, J.T.C.C. reviewed a number of cases including Minden, 62 DTC 1044 (Ex.Ct.) and Vineland Quarries, supra, and allowed the motion, saying that the taxpayer had not been unduly prejudiced and furthermore had due notice of what faced him at trial.
[18] I agree with Bowman, J. in Continental Bank Leasing Corporation et al. v. The Queen, 93 DTC 298, where he said at 302:
In the cases in the courts of Ontario and of British Columbia to which I was referred a number of tests have been developed - whether an admission was inadvertent, whether there is a triable issue raised by an amendment or the withdrawal of an admission and whether the other party would suffer a prejudice not compensable in costs. Although I find that these tests have been met I prefer to put the matter on a broader basis: whether it is more consonant with the interests of justice that the withdrawal or amendment be permitted or that it be denied. The tests mentioned in cases in other courts are of course helpful but other factors should also be emphasized, including the timeliness of the motion to amend or withdraw, the extent to which the proposed amendments would delay the expeditious trial of the matter, the extent to which a position taken originally by one party has led another party to follow a course of action in the litigation which it would be difficult or impossible to alter and whether the amendments sought will facilitate the court’s consideration of the true substance of the dispute on its merits. No single factor predominates nor is its presence or absence necessarily determinative. All must be assigned their proper weight in the context of the particular case. Ultimately it boils down to a consideration of simple fairness, common sense and the interest that the courts have that justice be done.
[19] For the foregoing reasons, the motion to amend the Reply to the Notice of Appeal is granted. The motion also asks for an Order granting costs of the motion to the Respondent. This, in a word, is peculiar. When I asked Respondent’s counsel about costs he responded that after the trial in the event that this Court dismissed the appeal he would submit that “perhaps costs might be awarded”. The following exchange took place:
HIS HONOUR: No, but you’re not asking for it now?”
MR. NOBLE: Not now, no, but the appellant is contesting the motion. I’m suggesting there isn’t a reasonable basis for the appellant contesting this motion. The appellant ought to have consented to the filing of this reply. He hasn’t. As a result, we’ve had to prepare materials and ask the court to consider the motion.
I did not find it as easy to come to a conclusion in respect of this motion as did Respondent’s counsel, the very party who made a motion to repair the Respondent’s own document, namely, the original Reply to the Notice of Appeal. I am a little astonished that counsel actually believes that the opposing party should bear the costs of his reparation work. It is improper, in my view, for the Appellant to be penalized for resisting a motion which it genuinely believed could affect the outcome of the case and in respect of which the law is not as crystal clear as is suggested by Respondent’s counsel. This is especially so where, as in this matter, the assessor had possession of the advertising material which described all the different camp activities but failed to pursue that information as part of the basis of reassessment. A decision as to costs is reserved until the issue of judgment in this case.
Signed at Winnipeg, Manitoba this 19th day of May 1998.
"R.D. Bell"
J.T.C.C.