https://decisia.lexum.com/fca-caf/decisions/en/item/306649/index.do
Canada v. Cheema (February 27, 2018 – 2018 FCA 45, Nadon, Stratas (author), Webb (dissent) JJ.A.).
Précis: CRA denied Mr. Cheema the GST/HST New Housing Rebate on the basis that his friend, Dr. Akbari, signed the agreement of purchase and sale for the home in question but, on the evidence, did not take title or contribute to the purchase price. The Tax Court allowed Mr. Cheema’s appeal on the basis that Dr. Akbari was an “accommodation party” or “bare trustee”. The decision was based on a number of earlier Tax Court decisions.
A majority of the Federal Court of Appeal allowed the Crown’s appeal declining to accept the exception that the Tax Court had devised. Webb J.A., in dissent, would have dismissed the appeal. The majority made no award of costs either in the Federal Court of Appeal or the Tax Court.
Decision: The majority rejected the “remedial” analysis of the dissent and of prior Tax Court jurisprudence:
[93] Mr. Cheema submits that the Court should have regard to a trust agreement under which Dr. Akbari held his ownership interest in trust for Mr. Cheema. Thus, Dr. Akbari held no beneficial interest in the property.
[94] The prerequisite in para. 254(2)(b) is drawn up in a way that makes those facts irrelevant. It speaks of the particular individual’s reason for acquiring the complex at the time that person “becomes liable or assumes liability under an agreement of purchase and sale of the complex.” It is the relationship of the person acquiring the complex to the builder—one of purchase and sale—that is relevant, not the relationship between co-purchasers.
[95] The fact that Dr. Akbari was acquiring the complex only as a trustee is of no consequence. The agreement of purchase and sale does not distinguish between Dr. Akbari and Mr. Cheema as purchasers. Nor does section 254 provide any exception for trustees.
[96] In any event, para. 254(2)(b) requires us to examine the purchaser’s intended use of the complex at the time the purchaser “becomes liable or assumes liability under an agreement of purchase and sale of the complex.” Even if we are to give effect to the trust agreement, it did not exist at that point in time.
[97] Parliament was detailed and precise in the wording of the prerequisites for the rebate set out in section 254 and it is not for this Court, in the words of Placer Dome (at para. 23), “to create an unexpressed exception” or “supplant” the clear language in section 254.
[98] It follows that the Tax Court erred. It relied on the trust arrangement between Dr. Akbari and Mr. Cheema, an arrangement extraneous to para. 254(2)(b). It did not base its finding on who was legally liable to the builder under the agreement of purchase and sale, which is the focus of para. 254(2)(b).
Justice Webb, in dissent, adopted a more flexible approach:
[67] Since Dr. Akbari only acquired his interest in the house as a bare trustee, this acquisition of an interest by him will be ignored for the purposes of paragraph 254(2)(a) of the ETA and, therefore, there was no supply by way of sale of a residential complex to him and he was not a particular individual. Dr. Akbari’s liability under the agreement of purchase and sale does not alter the determination that he did not acquire a beneficial interest in the residential complex from the builder. His liability under the agreement of purchase and sale does not, in and of itself, make him a particular individual for the purposes of subsection 254(2) of the ETA. The only individual who acquired a beneficial interest in the property from the builder for the purposes of the ETA in this case was Mr. Cheema. Since he satisfied the occupancy requirements and there was no indication that any of the other conditions were not satisfied, Mr. Cheema is entitled to the new housing rebate.
Comment: While the majority decision clearly accords with what might be termed “black letter” precedent, it is difficult to see what policy objective it fulfils. This subject matter would benefit from a review by the Supreme Court.