Younis v. R. – TCC: Taxpayer self-supplied residence which he constructed and then occupied – therefore was subject to HST on the self-supply

Younis v. The Queen (September 23, 2019 – 2019 TCC 198, Bocock J.).

Précis:   The taxpayer was assessed on the basis of self-supply on a residence which he constructed and then occupied.  He argued that the property was supplied to a third party before he entered into a lease to occupy the property.  The Court did not accept the evidence of a prior sale and dismissed the appeal without costs (this was an informal procedure appeal).

Decision:    This case boiled down to two major factors:  the taxpayer did not testify and the documentation was confusing and not fully in accord with the taxpayer’s position:

[4]  The appellant, Mr. Younis, did not testify. This was unfortunate because he may have clarified issues upon which the Court was required to make factual determinations by assigning weight to contradictory documents or was required to adopt the Minister’s unchallenged assumptions. Normal clarification through the benefit of knowledgeable, first-hand testimony was not possible. Instead, Mr. Khalilieh, Mr. Younis’ accountant, testified and represented Mr. Younis. While certain documents were presented to the Court, the transactions reflected were not supported through testimony by the parties who executed them.

[11]  What the documents telegraph is a significant time sequence error going to the chain of title of the Property. The head-tenant, Accurate Plus, leases the Property on January 1, 2015 before it takes title on February 17, 2015. That lease commences on January 16, 2015, again one month before title transfer. The Agreement to Lease is dated January 28, 2015 with possession granted on February 1, 2015. The Assignment Agreement is executed between Mr. Younis and Mr. Yousif, with a title transfer date of February 17, 2015. It bears two dates: January 27, 2015 on the first page and January 28, 2015 on the last. There is no precise date for the referenced, but not produced, tri-party agreement of purchase and sale for the Property beyond “the____ day of January 2015” reflected in the first recital of the Assignment Agreement. It merely describes Amacon, as vendor, and Mr. Younis, as purchaser.

[12]  All of the foregoing leads to uncertainty and confusion. Many possibilities exist within these facts. One is that Mr. Younis assigned his rights completely to Mr. Yousif on January 28, 2015, effective January 27, 2015. This requires the Court to believe, without any testimony, the effectiveness of this document which contradicts other facts. For instance, the sub-lease must be reconciled. An alternate conclusion is that the Assignment Agreement included within it, when executed on January 28, 2015, the rights and obligations arising under the sub-lease, a sub-lease executed by Mr. Yousif not as owner, but as agent for the owner, Mr. Younis. This alone would create the deemed self-supply.

[13]  Given the absence of testimony by Mr. Younis, Mr. Yousif or any representative for the ultimate owner, Accurate Plus Limited at the hearing, the Court opts for one of many possibilities: Mr. Younis supplied the property for residential leasing purposes on February 1, 2015 and was required to remit the HST as a builder deemed to make a self-supply. This is consistent with the Minister’s assumptions which remain unassailed.

[14]  In short, the person who had the subsisting right of ownership granted a lease of his interest in the unit possibly on January 1, 2015 through an agent and again on February 1, 2015 in order to give occupancy under the Lease Agreement on February 1, 2015. Factually, that person was the Appellant, Mr. Younis. That act constitutes a deemed supply by a builder. It carried an obligation to remit HST equal to the fair market value of the property on that date under subsection 191(10) of the ETA.

As a result the Court had no option but to dismiss the taxpayer’s appeal without costs (this was an informal procedure appeal).