Executive Summary: Key Legal and Evidentiary Issues

• The dispute centers on whether GST/HST self-assessment for 315 Southdale should be under subsection 191(1) or 191(3) of the Excise Tax Act.

• The Appellant’s intention to offer or not offer units at 315 Southdale for sale is a material fact in dispute.

• The Respondent’s motion for a determination under Rule 58 was dismissed as premature due to the absence of discovery and unresolved material facts.

• Both parties raised evidentiary objections, including issues of hearsay and settlement privilege, regarding affidavits and attached documents.

• The Court found that discovery is necessary before addressing factually intertwined legal questions under Rule 58.

• Costs are to be determined, with default to the Appellant in accordance with Schedule II of the Rules if no submissions are made within thirty days.

Background and facts of the case

Carvest Properties Limited (the Appellant) appealed a series of reassessments issued for its reporting periods between August 1, 2016 and October 31, 2017. The reassessments concern a residential apartment building located at 315 Southdale in London, Ontario, which was designed, constructed, and rented out to tenants by the Appellant during those periods. The building was registered as a condominium under the Condominium Act, but the Appellant claimed it never intended to offer any of the units for sale as a typical condominium developer would.

In its HST returns, the Appellant took the position that 315 Southdale was a multiple unit residential complex and that it was required to self-assess HST on the fair market value (FMV) of the building as a whole at the time specified in subsection 191(3) of the Excise Tax Act (ETA). The Minister disagreed, reassessing the Appellant on the basis that 315 Southdale was a series of residential condominium units, and that the Appellant was required to self-assess HST on the FMV of each individual unit at the times specified in subsection 191(1) of the ETA.

The Notice of Appeal identified three issues: (1) the amount of net tax for each reporting period, depending on whether subsection 191(3) or 191(1) applied and the relevant FMV; (2) the amount of the new residential rental property rebate, depending on whether a single or multiple rebate claims were appropriate; and (3) whether the Minister correctly computed the interest owing in respect of the reassessed amounts.

The motion and procedural developments

The Respondent brought a motion for an order that a question be determined under section 58 of the Tax Court of Canada Rules (General Procedure) (the “Rules”), specifically whether s. 191(1) of the ETA was the applicable provision to determine tax on the self-supply of the residential complex at 315 Southdale Road West, London, Ontario. The Respondent argued that an early determination would avoid the need for both parties to prepare two valuation reports for trial.

The Appellant opposed the motion, arguing it was premature because the parties had not filed lists of documents, undertaken examinations for discovery, or responded to undertakings, and that Rule 58 is ill-suited to the determination of issues involving material facts in dispute—specifically, whether there was ever any intention to offer units for sale.

The Court agreed with the Appellant, finding that it would be beneficial for the parties to conduct discovery before any Rule 58 proceeding. The Court noted that while Rule 58 can be used for questions involving material facts in dispute, it should not be so used where those facts are related to the remaining questions to be decided at trial.

Evidentiary issues and objections

The Appellant objected to the Respondent’s affidavit, sworn by a CRA employee, as irrelevant and hearsay. The Court disagreed that the affidavit was irrelevant but declined to rule on its admissibility, finding it would have no impact on the outcome of the motion and preferring not to restrict the trial judge’s discretion.

The Respondent objected to the Appellant’s inclusion of certain emails on the grounds of settlement privilege. The Court ruled that the emails did not contain a bona fide offer of settlement and were not protected by settlement privilege, and thus were admissible.

Discussion of policy terms and statutory provisions

The dispute concerns the application of subsections 191(1) and 191(3) of the ETA. The determination of which provision applies depends on whether the property is a multiple unit residential complex or a series of residential condominium units, which in turn depends on the Appellant’s intention regarding the sale of units—a material fact in dispute.

Analysis and outcome

The Court reviewed the requirements for a Rule 58 application, noting that such motions are discretionary and should not proceed when discovery is incomplete or when material facts are in dispute and related to the main issues for trial. The Court cited several precedents where early determinations were refused under similar circumstances.

Justice Rabinovitch concluded that the Respondent’s motion was premature and dismissed it, directing that the parties have thirty days to make submissions regarding costs, failing which costs would be awarded to the Appellant in the amounts provided for in Schedule II of the Rules.

Ruling and overall outcome

The Respondent’s motion for an order under Rule 58 was dismissed. The Court found that the factual dispute regarding the Appellant’s intention to sell or rent the units at 315 Southdale precluded an early legal determination. The parties were directed to proceed to discovery. If no submissions on costs are made within thirty days, costs will be awarded to Carvest Properties Limited in accordance with Schedule II of the Rules. No specific monetary amount was determined at this stage.