Tax Court of Canada Judgments

Date: 20010410

Docket: 2000-554-GST-I

BETWEEN:

JAMES N. & MONIQUE P. CAIRNS,

Appellants,

and

HER MAJESTY THE QUEEN,

Respondent.

Reasons for Judgment

Sarchuk J.T.C.C.

[1]            This is an appeal by James N. and Monique P. Cairns from an assessment by the Minister of National Revenue (Minister) dated April 19, 1999 denying their application for a rebate of goods and services tax (GST).

[2]            There is agreement regarding the following facts. On October 27, 1994, the Appellants purchased, as a personal residence, a residential strata unit at 3C-328 Taylor Way, West Vancouver and in doing so, acquired a lease interest by way of assignment of one of the stratified leases converted from the developer's lease. The purchase price was $370,000 in addition to which the Appellants were required to and did pay to the vendor the amount of $25,900 as GST. The transaction was completed on October 27, 1994. A General Application for Rebate of the full amount of GST paid was filed by the Appellants and received by the Minister on October 1, 1998. On April 19, 1999, the rebate was denied by the Minister on the basis that it had not been filed within the prescribed time period as set out in subsection 261(3) of the Excise Tax Act (the Act).

[3]            Mr. Cairns testified that the property in issue, a suite, was purchased primarily to accommodate the needs of his wife who was seriously ill. However, by the time the transaction was completed, it had become evident that they could not take occupancy because of the severity of her health problems and her reluctance to move. As Mr. Cairns put it, "she just didn't want to leave her own home". In November 1994, Cairns became concerned that their failure to take occupancy might affect their right to obtain a new housing rebate. As a result, he made enquiries at Revenue Canada and advised the agent that because of his wife's health problems, they were unable to occupy the property and sought to confirm his understanding that GST was refundable on the purchase. The advice he received from Revenue Canada at that time was that they were not eligible for the new housing rebate. He further testified that he was advised that "irrespective of whether you've occupied it or not, you have four years from the time that you purchased it to claim the GST rebate". He added that at all relevant times, they continued to believe that they had four years from the time of purchase to determine the GST rebate situation. Then when the situation was clarified by the decision in Taylor and Redmond v. The Queen,[1] the Appellants filed their General Application for Rebate dated September 29, 1998. This was Cairns said approximately one month prior to the expiration of what they had been advised to be the four-year permissible period.

[4]            The Appellants were not represented by counsel. Mr. Cairns had been present in Court throughout the hearing of the appeals in the Earnshaw and Throness v. The Queen, Alfred v. The Queen and May v. The Queen[2] appeals. On behalf of himself and his wife, he asked the Court to consider the position and arguments advanced in those cases and apply them to their appeal. There was no objection from counsel for the Respondent.

Legislative Scheme

[5]            The relevant provisions of the Act in effect on October 1, 1998 when the Appellants General Application for Rebate was received by the Minister[3] read as follows:

261(1)      Where a person has paid an amount

(a)            as or on account of, or

(b)            that was taken into account as,

tax, net tax, penalty, interest or other obligation under this Part in circumstances where the amount was not payable or remittable by the person, whether the amount was paid by mistake or otherwise, the Minister shall, subject to subsections (2) and (3), pay a rebate of that amount to the person.

...

261(3)      A rebate in respect of an amount shall not be paid under subsection (1) to a person unless the person files an application for the rebate within two years after the day the amount was paid or remitted by the person.

Subsection 261(3) as it read at that time reflected an amendment made in 1997 reducing the prior limitation period from four years to two years. The amendment further provided that:

                71(2)        Subsection (1) applies:

(a)            to amounts that, after June 1996 are paid as or on account of, or are taken into account as tax or other amount payable or remittable under Part IX of the Act; and

(b)            to amounts that, on or before the last day of that month, were paid as or on account of, or were taken into account as tax or other amount payable or remittable under that part, other than amounts that are claimed in an application under section 261 of the Act filed on or before June 30, 1998.[4]

Appellants' Position

[6]            The Appellants rely on the decision in Taylor and Redmond v. The Queen[5] in which Garon C.J.T.C.C., in identical circumstances, held that the Appellants' acquisition of their respective residential units was exempt from tax under Part IX of the Act and that accordingly, the Minister's assessment to deny them a rebate of taxes paid in error was vacated. Since this decision was handed down on July 27, 1998 the Appellants contend that their right to file a General Application for Rebate was postponed effective as of that date. In support of this position, it was submitted that the appropriate interpretation of subsection 261(1) can be ascertained by reading subsections (1) and (3) together and utilizing subsection (1) in determining what was meant by the phrase "within two years after the day the amount was paid or remitted by the person". It was further submitted that it is necessary to import into the meaning of subsection (3) the concept of "was not payable or remittable by the person" from subsection (1). When read in this fashion and accepting the fact that the Appellants did not learn that the amount in issue "was not payable" by them until such time as the Taylor and Redmond decision was handed down, at that point i.e. July 27, 1998, if the statutory limitation did in fact apply, they had two years within which to make their application. The Appellants contend that interpreting the words referred to in this fashion does not violate the plain meaning and intent of the statute but interprets the law in a creative fashion in order to enable the Court to interpret the relevant sections in a manner which provides relief for the Appellants.

[7]            In support of this approach to the interpretation of taxing statutes, reference was made to the decision in Smith Drugs Ltd. v. M.N.R.[6] wherein Reed J. stated:

                With respect to the statements in Fries v. M.N.R., (1990) 114 N.R. 150; 90 DTC 6662 (S.C.C.) and Johns-Manville Canada Inc. v. M.N.R., (1985) 60 N.R. 244; 85 DTC 5373 (S.C.C.) which indicate that in cases of uncertainty the taxpayer must be given the benefit of the doubt, I do not interpret those comments as in any way resiling from the principle set out in Stubart. In my view, those cases merely indicate that if after one has read the relevant statutory provisions of an Act and read them in light of the purpose and object of the statute, there is still doubt as to which alternative interpretation was intended, then, that doubt should be resolved in favour of the taxpayer, regardless of whether the provision in question is a charging section or an exemption or deduction provision.

[8]            These Appellants also adopt the supplementary submissions filed in May v. The Queen, supra. In that appeal, it was argued that a reasonable interpretation of subsection 261(3) of the Act suggests that a person subject to the provisions of the Act is, in the usual case, aware of a sale of a taxable supply that did not go through, remained unpaid or was consumed outside of Canada. In such circumstances, GST would not be payable and the person would apply for a rebate of GST remitted on the sale within the limitation period. On the other hand, a person would not normally know that a rebate of an exempt supply collected in error by Revenue Canada is possible until a Court determines that the supply is exempt. In the case of these Appellants, the determination that the supply of their leasehold interest was an exempt supply was not made until the Taylor and Redmond decision which was handed down after the limitation period had expired. Relying on a recent decision of the British Columbia Court of Appeal (BCCA), Hansen v. The Queen,[7] it was argued that subsection 261(3) may be interpreted as a limitation that is procedural in nature because it determines that a person make the application for a rebate when the person becomes aware of circumstances in which the GST would not be payable. In Hansen, the BCCA held that a limitation that is procedural in nature can be extended by agreement or estoppel. Thus, the Appellants say, Revenue Canada by accepting that purchasers were entitled to rebates but only after the Taylor decision was handed down, effectively agreed to extend the commencement of the limitation period to the date of the decision i.e. July 27, 1998.

[9]            The Appellants also contend that the Minister is estopped from denying their claim for a rebate by asserting that their application is statute-barred by reason of being out of time. They say that if their application is in fact statute-barred, the failure to file within the requisite time was the result of representations made by the Minister's servants and agents prior to the expiration of the limitation period with respect to their right to a general rebate.

Minister's Position

[10]          The Respondent contends that the Appellants paid the tax before June 30, 1996. Thus, any application for a rebate of tax paid in error must have been filed by June 30, 1998. Accordingly, the Minister properly assessed the Appellants by denying the application because the Appellants did not file their application until October 1, 1998, three months after the statutory deadline of June 30, 1998.

Conclusion

The Limitation Period Argument

[11]          I have concluded that the "creative approach" to the interpretation of subsections 261(1) and (3) of the Act as proposed by counsel for Vivian M. May, supra, must be rejected. The intention of Parliament to limit the time period for the filing of a rebate application has been set out in clear and unambiguous language. What is being sought by the Appellants is to have the Court interpret this particular provision to make it say what they believed would have been said by the legislators if this particular situation had been before them. When the meaning is clear, this Court has no jurisdiction to mitigate a harsh consequence. While this Court may be entitled to construe the language of an Act of Parliament, it may not distort it to make it accord with what the Court may think to be reasonable.[8]

[12]          I am also of the view that the decision in Hansen is distinguishable both in fact and in law. The issue in that case was whether she was barred from pursuing a claim for compensation for land taken for highway purposes by reason of a one-year limitation in section 25 of the Expropriation Act.[9] The Expropriation Compensation Board (the Board) held that the Ministry was estopped from relying on the limitation period. The appeal was from that determination. The facts in Hansen are that at a meeting between solicitors in June 1995 the Ministry's negotiator led Hansen's solicitor to believe that the one-year limitation period would run from August 8, the possession date, rather than from July 21, being one year from the date of payment as stipulated in the relevant provision. MacKenzie J.A. found that "the representation was unambiguous. It was a representation of fact. It was intended to be relied upon, and was relied upon" and held that the Board was correct in its conclusion that the elements of promissory estoppel were made out. This decision is of little assistance to the Appellants since the estoppel as found involved a representation of fact which was acted on by Hansen to her detriment. That is not the case in the present appeal where the representations by Gravelle (and other Revenue Canada officials) were reflective of the Department's interpretation of the relevant statutory provisions of the Act.

[13]          Relying specifically on the following comment of MacKenzie J.A. in Hansen:

Section 25, as well as barring proceedings after the expiration of one year, deems the owner to have accepted advanced payment in full settlement, in the absence of a further claim within time. In my view, that does not extinguish the claim but simply deems the claim paid. The distinction may be a subtle one, but I think that the wording of section 25 lays down a limitation that is procedural in nature which can be extended by agreement or estoppel.

it was also argued that the limitation in subsection 261(3) of the Act is procedural in nature and can be extended by agreement or estoppel. I am unable to agree. First the Appellants have not made out a case for estoppel. Second, the limitation period set out in subsection 261(3) of the Act is substantive in nature and not merely procedural and cannot be extended. It provides that "a rebate ... shall not be paid ... unless the person files an application for the rebate within two years ... ". As counsel for the Respondent observed, this provision clearly extinguishes all rights to the rebate. Furthermore, there is no suggestion the Appellants were incorrectly informed by any Revenue Canada official of the limitation period for filing a rebate application. Thus it is difficult to find any basis for the submission made that Revenue Canada "effectively agreed to extend the limitation until after the Court decision" in Taylor and Redmond. Furthermore, even if the Appellants had been able to establish that Revenue Canada entered into some form of agreement with them, it would in effect be an agreement to assess tax otherwise than in accordance with the law and would be an illegal agreement.[10]

[14]          To the foregoing, I must add that there is no provision in the Act granting authority to the Minister or providing the Federal Court or this Court with jurisdiction to waive, extend or alter the statutory time periods specified in a subsection such as 261(3).[11]

Estoppel argument

[15]          There is no evidence that any officer or agent of Revenue Canada provided the Appellants with erroneous information with respect to their right to a General Rebate. However, by the latter part of 1995, it was common knowledge amongst all of the people who had purchased the strata units in issue that Revenue Canada's position was that they were not entitled to the rebate. Furthermore, although there is no direct evidence on point, it is reasonable to infer that the Appellants were aware of this position and believed that implicit in Revenue Canada's position was that they should not make an application because it would not be successful. It is also a fair inference that, like many others, they acted on it and concluded that making an application would be a waste of time. Thus, relying on the correctness of the expressed Revenue Canada position, they failed to submit their application within the time period prescribed.

[16]          Although it is clear that the Appellants acted to their detriment as a result of the representations made by Revenue Canada employees as to the relevant provisions of the Act, they cannot succeed. Issue estoppel has been considered in a number of cases and the principle which can be taken therefrom is that no representation involving an interpretation of law by a servant or officer of the Crown can bind it. In The Minister of National Revenue v. Inland Industries Limited,[12] the Supreme Court of Canada considered certain sections of the Income Tax Act respecting the deductibility of past service contributions to a pension plan initially accepted by the Department of National Revenue for registration but with respect of which deductions were later refused. Pigeon J. speaking for the Court effectively disposed of any question of an estoppel by stating:

... However, it seems clear to me that the Minister cannot be bound by an approval given when the conditions prescribed by the law were not met.

This principle was applied in Stickel v. M.N.R.[13] by Cattanach J. who stated:

                In short, estoppel is subject to the one general rule that it cannot override the law of the land.

[17]          The rationale for the principle expressed in these cases was succinctly summarized by Bowman J. in Goldstein v. The Queen:[14]

                It is sometimes said that estoppel does not lie against the Crown. The statement is not accurate and seems to stem from a misapplication of the term estoppel. The principle of estoppel binds the Crown, as do other principles of law. Estoppel in pais, as it applies to the Crown, involves representations of fact made by officials of the Crown and relied and acted on by the subject to his or her detriment. The doctrine has no application where a particular interpretation of a statute has been communicated to a subject by an official of the government, relied upon by that subject to his or her detriment and then withdrawn or changed by the government. In such a case a taxpayer sometimes seeks to invoke the doctrine of estoppel. It is inappropriate to do so not because such representations give rise to an estoppel that does not bind the Crown, but rather, because no estoppel can arise where such representations are not in accordance with the law. Although estoppel is now a principle of substantive law it had its origins in the law of evidence and as such relates to representations of fact. It has no role to play where questions of interpretation of the law are involved, because estoppels cannot override the law.

[18]          The question before me is whether the representations made by officials of Revenue Canada to various strata unit owners with respect to the taxability of the supply of their units were representations of fact or law. These representations were in essence that the acquisition of the strata units was considered to be a sale and purchase and did not constitute an exempt supply and as such was properly subject to the 7% GST. In my view, these representations were not statements of fact but rather were an opinion as to the appropriate interpretation of the relevant statutory provisions of the Act. In such circumstances, it is not open to the Appellants to set up estoppel to preclude the Minister from relying on the provisions of subsection 261(3) of the Act to deny their claim for a rebate.

[19]          Several other grounds were pleaded by the Appellants including unjust enrichment and negligence by and on the part of the Minister and, relying on the provisions of the Limitation Act of British Columbia, asserting that their claim was not statute-barred. These grounds were not pursued.

[20]          On August 23, 2000, judgments in Melton v. The Queen and Setton v. The Queen[15] were rendered. These cases involved issues identical to those in the Cairns appeal. In both Melton and Setton, the Court relying on subsection 43(c) of the Interpretation Act[16] and the Ontario Court of Appeal's interpretation of a similar section of the Ontario Interpretation Act in the case of Re Falconbridge Nickel Mines Ltd. v. Minister of Revenue for Ontario,[17] the Court concluded that:

... The mere fact that the Appellants had purchased their condominium units during the time former subsection 261(3) of the Act was enforced and had erroneously overpaid GST, entitled them to a right to claim refunds within the four-year period. The Minister had a duty to refund those amounts even if the application was considered late pursuant to the amended subsection 261(3). The Appellants had an accrued right or an accruing right to the monies held by the Minister until the four-year period expired.

Parliament has not specifically eliminated the accrued right of taxpayers who fell within the four-year limitation period of the former subsection 261(3) of the Act. Immediately after the amendment came into force each of the Appellants still possessed an accrued right to file the application for the GST rebate and to receive the refund. Their right to a refund would have expired at the end of the four-year period.

Since this issue had not been raised in the course of the present appeal, both parties were permitted to present further submissions. The Appellants made no further submissions and are content to rely on the decision in Melton and Setton. The Respondent's position is that Parliament explicitly expressed "a contrary intention" to the operation of subsection 43(c) of the Interpretation Act through the amending legislation, i.e. subsection 261(3) of the Act.

[21]          More specifically, counsel for the Respondent contends that subsection 261(3) was amended by S.C. 1997, c. 10, s. 71 (the "Amending Statute"). This statute implemented measures proposed in a Notice of Ways and Means Motion tabled on April 23, 1996. Subsection 71(1) of the Amending Statute had the effect of reducing the time period within which one must apply for a rebate of GST paid in error from four years to two years. Subsection 71(2) dealt with the application of this amendment. That provision reads as follows:

71(2)        Subsection (1) applies

to amounts that, after June 1996, are paid as or on account of, or are taken into account as, tax or other amount payable or remittable under Part IC of the Act; and

(b)            to amounts that, on or before the last day of that month, were paid as or on account of, or were taken into account as, tax or other amount payable or remittable under that Part, other than amounts that are claimed in an application under section 261 of the Act filed on or before June 30, 1998.

The Respondent argues that Parliament provided a complete code for the enactment of the amendment through paragraphs 71(2)(a) and (b). These two paragraphs cover all possible time periods in which a taxpayer may have paid amounts as GST in error. Paragraph (a) provides that the Amending Statute applies where amounts are mistakenly collected as GST after June 30, 1996. Paragraph (b) addressed the application of the amendment to amounts that are mistakenly collected as GST before the end of June 1996. Thus, the Respondent argues the plain language of paragraph (b) makes it clear that, under certain circumstances, the amendment is indeed to apply to amounts paid before the end of June 1996. Specifically, the amendment is said to apply to these amounts unless an application for rebate is filed before the end of June 1998. Parliament has expressed an intent to have the amendment apply to certain amounts even if those amounts were paid prior to the announcement of the pending amendment as in the case of the Appellants. It is therefore submitted that Parliament has made an explicit choice to extinguish any accrued rights which may have existed under the previous wording of subsection 261(3).

[22]          The Respondent further argued that the fact Parliament has explicitly set out how each and every transaction involving GST paid in error is to be handled in light of the amendment, whether the payment was made before or after June 30, 1996, leaves no room for operation of paragraph 43(c) of the Interpretation Act. As Parliament has expressed an intent contrary to that of paragraph 43(c), the Respondent submits that subsection 3(1) operates to exclude the amendment from the effects of paragraph 43(c). It is further submitted by the Respondent that to give effect to paragraph 43(c) would be contrary to the express intent of Parliament and therefore contrary to subsection 3(1) of the Interpretation Act.

Analysis

[23]          The interaction of paragraph 43(c) and subsection 3(1) of the Interpretation Act were considered in the case of Esso Resources Canada Limited v. The Queen.[18] In that case, federal legislation taxing natural gas and gas liquids allowed for a refund on the tax paid in certain circumstances. The taxpayer purchased quantities of natural gas liquids and used it for a permissible purpose during the period May 24, 1985 to December 31, 1985. Amending legislation repealed the excise tax on natural gas liquids as of March 4, 1986. On December 1, 1986, the taxpayer applied for a refund of the tax which had been paid pursuant to the Act. The Minister rejected the application arguing that the relevant sections of the Excise Tax Act had been repealed. The appeal of the taxpayer was allowed. Reed J. found that the taxpayer had made an overpayment by virtue of the fact the tax was paid on a tax-exempt commodity. After concluding that the Plaintiff in that case had a right accrued or accruing to the monies held by the Defendant, Reed J. observed at pages 6476-77:

A more difficult problem, however, is the argument that Parliament intentionally wiped out that accrued right by enacting the March 4, 1986 legislation. This argument is based on the fact that Parliament repealed not only the changing sections of Part V but also the refund provisions found in paragraph 68(1)(g). While section 43(c) of the Interpretation Act provides that repealing legislation does not affect accrued or accruing rights, that provision only operates where a contrary intention does not appear in the statute (see subsection 3(1) of that Act). Also, even if the Members of Parliament and the government did not intend, in a subjective sense, to make the gas in question taxable, if the express words of the statute so provide (even though those words were enacted through inadvertence) then those words must be given effect. If there is an express repeal of the right which had accrued to the plaintiff, then it must be left to Parliament to enact legislation to correct the error if it was his to do so. I would note that I have been given no rational explanation as to why Parliament, in repealing the Natural Gas and Gas Liquids Tax, might intend to turn gas which had previously been tax exempt into a taxed commodity.

There is no express repeal of the plaintiff's accrued right, in the sense of a provision stating "after June 1, 1985 no refunds of tax collected . . . will be payable". Can one say that such repeal occurred, however, as a matter of necessary implication? I do not think that any conclusion in this regard can be drawn from the fact that the amendment of March 4, 1986 was made retroactive to June 1, 1985. I find nothing in that retroactivity which, by itself, would lead necessarily to the conclusion that accrued rights existing on March 4, 1986 were intended to be revoked. This in part arises from the fact that the tax-exempt status under the terms of the legislation related back to the date of the imposition of the tax. Also, as of March 4, 1986, everything had been done by the plaintiff (except for the filing of an application) to entitle it to a refund and there was no express repeal of that right. The argument that Parliament intended as a matter of necessary implication to repeal the plaintiff's right is based solely on the fact that the authority in paragraph 68(1)(g) to make a refund in the case of Part V taxes was repealed. I am not willing to conclude, however, that the repeal of paragraph 68(1)(g) indicates that Parliament intended, as a matter of necessary implication, to repeal the plaintiff's accrued rights. At most it may have inadvertently repealed the refund mechanism and thereby made the right unenforceable, although I do not think this is the case.

[24]          I am satisfied that contrary to the situation in Esso Resources such a provision does exist in the present appeal. Subsection 71(1) of the Amending Statute amends subsection 261(3) of the Act to read: "a rebate ... shall not be paid ... unless the person files an application for the rebate within two years ...". Paragraph 71(2)(b) goes on to provide that the amendment to subsection 261(3) of the Act applies to situations where GST was paid in error prior to the end of June 1996 and no application was filed by the end of June 1998. These provisions, in my view, read together constitute in clear and unambiguous terms the express "contrary intention" that was found lacking in Esso Resources.

[25]          The decision in Falconbridge Nickel Mines is distinguishable since the Ontario Court of Appeal made no reference to any statutory provisions which in any sense could be considered to be as the expression of a contrary intent by the provincial legislature. As well, the Ontario Court of Appeal spoke of the facts in Falconbridge Nickel Mines as being "unusual circumstances", recognizing that prior to the amendment no limitation period whatsoever existed in respect of the application for rebate in question. That Court also recognized that the amendment allowed for no transitionary period after the amendment and thus, if a taxpayer was beyond the limitation period at the time the amendment was brought into force, then it immediately lost all ability to apply for a rebate. In those circumstances, the Court found that a right had accrued to make the application. This situation as well is distinguishable since the amendment of subsection 261(3) did nothing more than shorten an existing limitation period. Furthermore, the amendment statute did in fact provide for a period of transition in that a taxpayer was entitled to rely upon the previous four-year time limit as long as the application was submitted by the end of June 1998. Thus, if at the time of the amendment a person was beyond the two years but was within the four years of the date GST was paid in error, that person would still have up to two years within which the application should be submitted. This not only distinguishes the situation in Falconbridge Nickel Mines but is also evidence of the fact that Parliament structured the amendment in issue in a manner intended to address all possible factual scenarios and leave no room for the continuation of accrued rights. Parliament is not to be presumed to enact legislation without force and effect.[19] The existence of an accrued right to the four-year time limit cannot be reconciled with the wording of paragraph 71(2)(b) of the amending statute. Accordingly, in circumstances where no section 261 application for rebate had been filed prior to the end of June 1998, as is the case in the present appeal, the amended two-year time limit must be applied. The appeal is dismissed.

Signed at Winnipeg, Manitoba, this 10th day of April, 2001.

"A.A. Sarchuk"

J.T.C.C.

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