In Rochefort v. The Queen (2014 TCC 34), the Tax Court of Canada provided clarity on the definition of “ownership” for the purposes of the GST/HST New Housing Rebate. Justice Campbell Miller held that “ownership” in subparagraph 254(2)(e) of the Excise Tax Act (the “ETA”) does not necessarily mean holding legal title but denotes a more expansive view of ownership.
In the case, the recently-married Mr. and Mrs. Rochefort decided to buy a new home. Unfortunately, shortly before the closing, Mr. Rochefort was advised by his bank that, due to his failure to sell his current property and his wife’s poor credit rating, the couple no longer qualified for a mortgage. Having already paid $20,000 in deposits, the couple chose to close the deal, and so they enlisted Mr. Fontaine, the nephew of Mr. Rochefort, to act as a co-signor on a mortgage from another bank.
Mr. Fontaine testified that he was prepared to help his uncle by signing whatever documents were required. Mr. Fontaine in fact signed a Fixed Rate Mortgage form, as well as a Direction re: Title, authorizing the lawyers to transfer the deed to Mr. Rochefort and Mr. Fontaine as joint tenants. It was evident from Mr. Fontaine’s testimony that he was not entirely clear as to what he had signed, and he had no intention of ever living in, or receiving a benefit from, the property. Rather, it was clear that the new home was for the sole benefit of Mr. and Mrs. Rochefort, and Mr. Fontaine was merely assisting a family member by doing a favour.
Mr. Rochefort signed the new housing rebate in 2010 and, as a result, the developer was credited with $27,278. The Minister of National Revenue reassessed Mr. Rochefort on the basis that he was not entitled to the rebate as the definition of “ownership” in subparagraph 254(2)(e) of the ETA had not been satisfied.
The Minister argued that, under subparagraph 254(2)(e), “ownership” must be transferred to a “particular individual” (the Court noted that, where there is more than one purchaser, subsection 262(3) of the ETA makes it clear that “particular individual” refers to both purchasers). Ownership had not been transferred to Mr. and Mrs. Rochefort but had been transferred to Mr. Rochefort and Mr. Fontaine. Therefore, in the Minister’s view, this requirement had not been met.
The Tax Court disagreed. Mr. and Mrs. Rochefort were the “particular individuals” who signed the Agreement of Purchase and Sale and, thus, Mr. Fontaine was not a “particular individual” for the purposes of the ETA. The requirements in subsection 254(2) of the ETA had been met by Mr. Rochefort. The only question was whether the other “particular individual” (i.e., Mrs. Rochefort) had ownership transferred to her as required by subparagraph 254(2)(e).
The Minister argued that “ownership” meant title to the property, and suggested that definition of owner in the Ontario Land Titles Act (i.e., an owner in fee simple) should apply for the purposes of the ETA. However, the Tax Court noted that, if the drafters of the ETA had intended ownership to mean title, they could have said as much in the ETA. The Tax Court held that “ownership” for purposes of the GST/HST New Housing Rebate must be explored in a “textual, contextual and purposive manner for a fuller meaning than simply title.”
The Court interpreted subparagraph 254(2)(e) as a timing condition – ownership happens after substantial completion. This view is consistent with the views expressed by the CRA in GST/HST Memorandum 19.3.1 “Rebate for Builder-Built Unit (Land Purchased)” (July 1998, as amended in 2002 and 2005).
The Tax Court viewed Mr. and Mrs. Rochefort as the individuals the rebate was intended to benefit. They were the buyers of the property, the individuals liable for the GST, and they took possession of the property after its substantial completion in order to reside in it as their primary residence. Moreover, Mrs. Rochefort had acquired sufficient rights to constitute ownership thereby satisfying the requirements in 254(2)(e): she had signed the Agreement of Purchase and Sale to become an owner, she had made the necessary deposits, she acted as an owner in making decisions to amend the Agreement of Purchase and Sale, she was liable for the GST, she took possession of the property with her husband, and had acted in every way as an owner by enjoying the property.
The Tax Court concluded that Mrs. Rochefort was a beneficial owner of the property and that Mr. Fontaine had agreed to hold title solely for the benefit of the Rocheforts. As a trustee, Mr. Fontaine was required to convey title to the Rocheforts on demand or to any third party at their request. “Ownership” of the property had been transferred to Mrs. Rochefort.
Accordingly, the taxpayer’s appeal was allowed and Mr. Rochefort was entitled to the GST/HST New Housing Rebate under subsection 254(2) of the ETA.