Tax Court of Canada Judgments

 

Docket: 2008-1272(GST)I

 

BETWEEN:

MICHEL COUTU,

Appellant,

and

 

HER MAJESTY THE QUEEN,

Respondent.

[OFFICIAL ENGLISH TRANSLATION]

____________________________________________________________________

Appeal heard on common evidence with the appeal of Diane Miron

(2008-1273(GST)I) on October 24, 2008, at Montréal, Quebec.

 

Before: The Honourable Justice Lucie Lamarre

 

Appearances:

 

For the Appellant:	The Appellant himself
Counsel for the Respondent:	Brigitte Landry

 

____________________________________________________________________

 

JUDGMENT

          The appeal from the assessment made under Part IX of the Excise Tax Act, notice of which is dated November 4, 2005, and bears the number DGE‑10225, is dismissed.

 

Signed at Montréal, Quebec, this 25th day of November 2008.

 

 

"Lucie Lamarre"

 

 

Translation certified true

on this 16th day of December 2008.

 

Brian McCordick, Translator

 

Docket: 2008-1273(GST)I

BETWEEN:

DIANE MIRON,

Appellant,

and

 

HER MAJESTY THE QUEEN,

Respondent.

[OFFICIAL ENGLISH TRANSLATION]

___________________________________________________________________

Appeal heard on common evidence with the appeal of Michel Coutu

(2008-1272(GST)I) on October 24, 2008, at Montréal, Quebec

 

Before: The Honourable Justice Lucie Lamarre

 

Appearances:

 

Agent for the Appellant:	Michel Coutu
Counsel for the Respondent:	Brigitte Landry

 

____________________________________________________________________

 

JUDGMENT

          The appeal from the assessment made under Part IX of the Excise Tax Act, notice of which is dated November 4, 2005, and bears the number DGE‑10224, is dismissed.

 

Signed at Montréal, Quebec, this 25th day of November 2008.

 

 

"Lucie Lamarre"

 

 

Translation certified true

on this 16th day of December 2008.

 

Brian McCordick, Translator

 

 

 

 

       Citation: 2008 TCC 641

Date: 20081125

Dockets: 2008-1272(GST)I

2008-1273(GST)I

 

BETWEEN:

MICHEL COUTU,

DIANE MIRON,

Appellants,

and

 

HER MAJESTY THE QUEEN,

Respondent.

 

[OFFICIAL ENGLISH TRANSLATION]

 

 

REASONS FOR JUDGMENT

 

Lamarre J.

[1]              The Appellants filed an application for a new residential rental property GST rebate with the Minister of Revenue of Quebec ("the Minister") in respect of a triplex that they built. The Appellants live in one of the units (48% of the total area). The Appellant Michel Coutu's parents live in another unit (22% of the total area) and the third unit, which accounts for the remainder of the total area, is rented to a third party.  

 

[2]              The Minister's position is that the triplex is used primarily by the Appellants and by people related to the Appellants (namely Mr. Coutu's parents). Consequently, the Minister decided that the Appellants were not required to remit GST to the Respondent on the self-supply of the triplex, as contemplated in subsection 191(3) of the Excise Tax Act (ETA), because they benefitted from the exception set out in subsection 191(5) of the ETA. However, this resulted in the Appellants being denied the new residential rental property GST rebate that they claimed under subsection 256.2(3) of the ETA. Specifically, the Minister made an assessment in which the net tax on the self-supply of new residential rental property, and the rebate for the new rental property, were both nil. The Appellants are appealing from that assessment.

 

[3]              The relevant statutory provisions read as follows:

 

[4]              The entire dispute is about the interpretation of the phrase that I have underlined in subsection 191(5), with a view to determining whether the Appellants, the builders of the triplex, are making personal use of it. Specifically, Parliament has enacted an exemption for a builder of a residential complex who is an individual. Such an individual is exempt from the tax on self-supplies where the complex is "used primarily as a place of residence for the individual, an individual related to the individual or a former spouse or common‑law partner of the individual". If, by virtue of this provision, the Appellants are exempt from the tax on the self-supply, their claim for a rebate of that tax under subsection 256.2(3) cannot be allowed.

 

[5]              Is the triplex in the case at bar "used primarily as a place of residence by [the Appellants] . . . or an individual related to [the Appellants]?"

 

[6]              "Primarily" means more than 50 percent (see Foote v. Canada, 2007 TCC 46, [2007] T.C.J. No. 17 (QL)).

 

[7]              The Appellants submit that they live in a single unit in the triplex and do not occupy more than 50 percent of the complex. In their submission, the fact that Mr. Coutu's parents live in another unit of the triplex should not be taken into account. They argue that the enactment refers to a complex used primarily as a place of residence by the individual or an individual related to the individual. They emphasize that the enactment does not say "used primarily . . . by the individual and an individual related to the individual."

 

[8]              The Appellants rely on a decision of the Court of Québec, Fortin v. Québec (Sous-ministre du Revenu), [2006] R.D.R.Q. 153, in which it was held that the use of the word "ou" (or) in subsection 227(2) of the Act respecting the Québec sales tax, which is the counterpart of subsection 191(5) of the ETA, is disjunctive, not conjunctive. In Fortin, the applicants occupied 50 percent of the complex, and the parents of one of the applicants occupied 25 percent of it. Consequently, the Court held that the applicants did not occupy the complex primarily as a place of residence, because the parents' use of a part of the complex was not to be taken into account. The Minister appealed from this decision. The applicants dropped out of the appeal proceedings.

 

[9]              Counsel for the Respondent relies on the grammatical definition of the word "ou" in the Dictionnaire des difficultés du français,[1] which reads:

 

OU (conjonction) ̈ Orth. Jamais d’accent grave, à la différence de l’adverbe relatif. On reconnaît qu'on a affaire à la conjonction à ceci, qu’il est toujours possible de substituer ou bien à ou. Il boit du lait, ou du vin, ou de l’eau, ou de la cervoise, indifféremment dans l’or, dans le verre, dans la corne ou dans l’onyx (Valéry). ̈ Emploi. Dans une approximation située entre deux nombres consécutifs, on emploie la préposition ou. Il y avait là neuf ou dix personnes. Mais –> À.

 

[TRANSLATION]

 

OU (conjunction). ♦ Spelling. Never with a grave accent. (This distinguishes it from the relative adverb.) It is clear that it is a conjunction where "ou bien" can be substituted for "ou". Il boit du lait, ou du vin, ou de l’eau, ou de la cervoise, indifféremment dans l’or, dans le verre, dans la corne ou dans l’onyx (Valéry). [He drinks milk, wine, water or barley beer from containers of gold, glass or onyx or from horns.] Usage. The word "ou" is used in estimates which cite two consecutive numbers: Il y avait là neuf ou dix personnes. [There were nine or ten people there.]

 

[10]         Thus, the Respondent's position is that if the word "ou" can be replaced by "ou bien", it is conjunctive on the same basis as "et". In her submission, the word "ou" in subsection 191(5) is used in the conjunctive sense. Thus, if the Appellants and parents occupy more than 50 percent of the complex primarily as a place of residence, the Appellants are exempt from the tax on the self-supply by virtue of subsection 191(5) and are therefore not entitled to the rebate contemplated in subsection 256.2(3) of the ETA.

 

Analysis

[11]         In Radage v. Canada, [1996] T.C.J. No. 730 (QL), Judge Bowman stated:

 

16 A preliminary question, before I come to the meaning of these words, is whether "and" is disjunctive or conjunctive. As Maxwell On Interpretation of Statutes, 12th Ed., observes at pp. 232-233,

 

In ordinary usage, "and" is conjunctive and "or" disjunctive. But to carry out the intention of the legislature it may be necessary to read "and" in place of the conjunction "or", and vice versa.

 

[12]         In Russell v. Canada, [2001] T.C.J. No. 409 (QL), Judge Bowman stated:

 

11     It should not be automatically assumed without some analysis that "or" in the definition is conjunctive. At the very least the court should consider whether the provision was ambiguous and whether the ambiguity should be resolved in favour of the taxpayer. (Stubart Investments Limited v. The Queen, 84 DTC 6305; Fries v. The Queen, 90 DTC 6662).

 

12     I start from the premise that "or" is prima facie disjunctive and that it should not be treated as conjunctive without good reason.

 

13     "Or" can however be conjunctive if the context requires it. If one starts by working backward from the tentative conclusion that "or" in the definition is disjunctive it would seem to mean that one must look to the income of either the individual or the individual's qualified relation (her spouse) but not both. If one starts from the tentative conclusion that "or" means "and" then it seems clear that one totals the income of both spouses. If this was the intention then what principle of legislative drafting requires that "or" be used?  

 

. . .

 

22    . . . Presumably the word "ou" is susceptible of the same disjunctive/conjunctive interpretation as "or" depending on the context. (Marzetti v. Marzetti, [1994] 2 S.C.R. 765).

 

[13]         In CCH Canadian Ltd. v. Law Society of Upper Canada, 2002 FCA 187, [2002] F.C.J. No. 690 (QL), the Federal Court of Appeal held:

 

45     This Court in Tele-Direct also suggested that the phrase "skill, judgment or labour" was intended to be used in the conjunctive, rather than disjunctive sense. . . .  

 

[14]         In Mercier v. Canada, [1997] T.C.J. No. 613 (QL), Dussault J. stated:

 

10     As to the question whether the word "and" used in s. 118.4(1)(c)(ii) is conjunctive or disjunctive, this is what Judge Bowman said in this regard:

 

Feeding and dressing oneself - counsel for the Minister, Mr. Bundy, in a very able argument, suggested that feeding and dressing both had to be activities that were restricted. In this I take it he means, or he is suggesting that, "and" is conjunctive rather than disjunctive. This is a matter of interpretation. I think that, and I don't have authorities in front of me, but I think that in some cases "and" can be conjunctive. In some cases I think it can be disjunctive. Here I am adopting a purposive, or what is called in one case a "teleological" approach, to the interpretation of the statute, that is, an interpretation that appears to be consonant with the scheme of the Act and the objective that the statute is endeavouring to achieve. I think it is more consonant with the scheme of the Act and with the object of this section that "and" be construed as disjunctive and therefore either feeding or dressing is sufficient. It need not be the two together. [References omitted.]

 

[15]         The Explanatory Notes concerning subsection 191(5) of the ETA (Canada, Department of Finance. Goods and Services Tax: Explanatory Notes to Bill C-62 [S.C. 1990, c. 45] as Passed by the House of Commons on April 10, 1990 (Ottawa: Department of Finance, May 1990)) which pertains to the self-supply of a residential complex, contain the following remarks:

 

 

Section 191                  Self-supply of residential property

 

            This section introduces self-supply rules where a builder constructs or substantially renovates a residential complex and subsequently rents it out to others or occupies it as a place of residence. In such a circumstance, the builder is treated as having sold and repurchased the residential complex. As a result, the builder is required to remit GST on the fair market value of the complex with the return for the reporting period in which the complex is substantially completed or rented out, whichever is later. As a result, the value-added by the builder is taxed. This rule ensures that such builders are treated the same as persons who purchased a new or substantially renovated residential complex for rental purposes. . . .  

 

. . .

 

The self-supply rule specifically does not apply to builders who are individuals and occupy a residential complex as their primary place of residence, provided that no input tax credits have been claimed in respect of the acquisition of the land and the construction or renovation.

 

. . .

 

Subsection 191(5)        Exception for personal use

 

The rules in subsections (1) to (4) do not apply where the builder is an individual and where, after the complex is substantially completed, it is used primarily as the builder's place of residence (or that of another individual who is either related to, or as a former spouse of, the builder), provided that the builder did not claim any input tax credits in respect of the complex. This rule treats such builders the same as individuals who self-build their own homes and who are not classed as builders under the GST (and therefore are not subject to the self supply rules). It should be noted that builders that supply their own residence may be eligible to claim a rebate of tax under section 256 is a complex is for use as their primary residence.

 

 

[16]         The kind of building to which the personal use exemption applies is a substantially completed building used primarily as a place of residence by the builder (or another individual who is related to the builder). We are not referring to a unit in the building, and nor, in fact, does the wording of the enactment.

 

[17]         A "residential complex" is defined as a building in which one or more residential units are located. A "multiple unit residential complex" is defined as a residential complex that contains more than one residential unit. A "residential unit" is defined as a detached house . . . condominium unit . . . or apartment occupied as a place of residence. In the case that concerns us, more than 50 percent of the building is occupied by the Appellants and by individuals related to them.

 

[18]         In my opinion, the context and the legislative intent indicate that the word "ou" is being used in an inclusive sense and expresses a conjunction, not a disjunction. Parliament has used the following wording in the enactment: "l'immeuble est utilisé principalement à titre résidentiel par le particulier, son ex‑époux ou ancien conjoint de fait ou un particulier lié à ce particulier." (Emphasis added.) There is a comma between the word "particulier" (individual) and the words "son ex‑époux ou conjoint de fait ou un particulier lié à ce particulier" (an individual related to the individual or a former spouse or common-law partner of the individual). In his treatise Le bon usage, Maurice Grevisse states, at page 169, §124, that in French, a comma must be placed between terms that are being coordinated without a conjunction, and that, in ordinary usage, the  coordinating conjunctions "et" and "ou" (ou bien) are placed before the last term of the coordination only (page 1567, §1033).^[2] Bescherelle, in La grammaire pour tous, states, at page 201, that if a comma is placed within a grouping, it is unnecessary to repeat the coordinating conjunction, which makes its only appearance with the last coordinated word. ^[3] Lastly, the Multidictionnaire de la langue française states, at page 1132, that, in an enumeration, a comma separates the nouns and adjectives that are enumerated but not connected by a conjunction (et, ou, or ni).^[4] Thus, by using a comma, Parliament was ascribing a conjunctive, not disjunctive, meaning to the phrase. (In addition, see CCH Canadian, supra, where the same sentence structure was used, and where the Federal Court of Appeal held that the terms were being used in a conjunctive sense.)

 

[19]         With respect to the context, as I have stated above, we are concerned with the occupation of the complex, not the unit. It makes more sense to me that Parliament meant to consider the primary use of the entire complex by the individual and any related individual, not by just one or the other. As for Parliament's intent, to the extent that the archived explanatory notes can provide us with guidance, it should be noted that they refer to the complex being "used primarily as the builder's place of residence", and that this is followed, in parentheses, by "(or that of another individual who is either related to, or is a former spouse of, the builder)". The Multidictionnaire, supra, instructs us, at page 1051, that parentheses are an explanatory element inserted into a sentence. Often, the words in parentheses express the author's thoughts about a given part of the sentence (La grammaire pour tous, supra, at page 205). In my opinion, the use of parentheses confirms the conjunctive, as opposed to disjunctive, sense. Indeed, what Parliament appears to be indicating here is that the residential use by the builder also includes the residential use by the related individual. 

 

[20]         Consequently, I am of the opinion that if 50 percent or more of the complex is used as a place of residence by the Appellants and Mr. Coutu's parents, the Appellants are covered by the exception in subsection 191(5), which means that they cannot claim the rebate contemplated in subsection 256.2(3) of the ETA.  

 

[21]         The Appellants say that they are being treated unjustly in relation to purchasers of single-family homes, who can claim a GST rebate on a new home, if they, the Appellants, are not entitled to the GST rebate on new residential rental property or the GST rebate on a new home.

 

[22]         It should be pointed out that new home buyers who are entitled to a GST rebate on their new home have paid the GST on the fair market value of the building. The builder of such a residential building who uses it as a place of residence is not required to pay that tax where the exception in subsection 191(5) applies. (See Canada Revenue Agency, Excise and GST/HST Rulings Directorate, Information Letter RITS/No. 37301, February 14, 2002, published in French by CCH Canadian Limited as part of its 2002 GST Rulings and Headquarters Letters database in the Goods and Services Tax Reporter online). Given this context, the injustice that the Appellants are alleging in connection with the GST rebate does not appear to exist.

 

Decision

[23]         For the above reasons, the appeals are dismissed, and the assessments dated November 4, 2005, and bearing the numbers DGE‑10224 and DGE‑10225, are confirmed.  

 

Signed at Montréal, Quebec, this 25th day of November 2008.

 

 

 

"Lucie Lamarre"

 

 

 

 

 

 

Translation certified true

on this 16th day of December 2008.

 

Brian McCordick, Translator

CITATION:                                       2008 TCC 641

 

COURT FILE NOS.:                         2008-1272(GST)I

                                                          2008-1273(GST)I

 

STYLES OF CAUSE:                        MICHEL COUTU AND HER MAJESTY THE QUEEN

 

                                                          DIANE MIRON AND HER MAJESTY THE QUEEN

 

PLACE OF HEARING:                     Montréal, Quebec

 

DATE OF HEARING:                       October 24, 2008

 

REASONS FOR JUDGMENT BY:    The Honourable Justice Lucie Lamarre

 

DATE OF JUDGMENT:                    November 25, 2008

 

APPEARANCES:

 

For the Appellants:	Michel Coutu
Counsel for the Respondent:	Brigitte Landry

 

COUNSEL OF RECORD:                

 

       For the Respondent:                    John H. Sims, Q.C.

                                                          Deputy Attorney General of Canada

                                                          Ottawa, Canada