Executive Summary: Key Legal and Evidentiary Issues

• The appellants challenged Additional Transfer Tax (ATT) assessment on the full property value when a Canadian citizen held a registered interest partly in trust for a foreign national.

• Central to the dispute was whether section 1(3) of the Property Transfer Tax Act deems registered owners as legal and beneficial owners, thereby negating any taxable trustee finding.

• Interpretation of s. 2.02(5) was contested regarding whether paragraph (a) or (b) governs the taxable amount when a transferee is both a Canadian citizen and a taxable trustee.

• A resulting trust was found because Mr. Chuang contributed 40% of the purchase price but only registered a 5% interest, with the appellants failing to rebut the presumption against a gift.

• Evidentiary weaknesses included the solemn declaration being ruled inadmissible as "triple" hearsay and insufficient to rebut the resulting trust presumption.

• The appellants' purposive interpretation argument—that ATT was not intended to apply to Canadian citizens—was rejected as inconsistent with the statutory language and scheme.

The property purchase and registration

In 2014, Li-Yuan Chuang, a foreign national, and Chia-Wen Hsia, a Canadian citizen, who were then engaged to be married, purchased a residential property in a specified area of British Columbia under a pre-sale contract. The Additional Transfer Tax provisions under the Property Transfer Tax Act came into effect on August 2, 2016. On March 28, 2017, the appellants completed the purchase and registered their respective interests on title—Ms. Hsia registered a 95% interest while Mr. Chuang registered only a 5% interest. They paid ATT based on 5% of the declared fair market value of the property, corresponding to Mr. Chuang's registered interest as the foreign national.

The financial contributions and audit findings

The actual financial contributions to the purchase did not align with the registered interests. Ms. Hsia's mother paid 60% of the purchase price while Mr. Chuang contributed 40%. Despite contributing 40%, Mr. Chuang registered only a 5% interest, which Ms. Hsia explained in a solemn declaration as being customary in Chinese culture to pay for "bride price" as in the husband buying a house for the wife, and that in her husband's case he was not rich so he could only pay for part of the purchase price. The appellants married in December 2017. Around this time, the registration was audited. The appellants did not explain the percentages of their registered interests in the property, but the auditor determined that Mr. Chuang held a greater beneficial interest than the 5% declared on the property transfer tax return. Concluding Ms. Hsia was a taxable trustee, the auditor assessed ATT on the fair market value of the whole property, using the assessed rather than the declared value.

The statutory framework at issue

Under the Property Transfer Tax Act, ATT—often called the foreign buyer's tax—applies when residential property in specified areas of British Columbia is transferred to a foreign entity, a taxable trustee, or both. Section 2.02(5)(a) provides that in the case of a taxable transaction in respect of which each transferee is a foreign entity or taxable trustee, or both, ATT is calculated on the taxable transaction's fair market value. Section 2.02(5)(b) applies "in any other case," calculating ATT on the proportionate shares held by foreign entities and taxable trustees. Additionally, section 1(3) of the PTTA provides that for the purpose of calculating tax payable under the Act, a person registered in the land title office as the owner of land is deemed to be the legal and beneficial owner of a fee simple interest in the land, even if the person holds the land in trust.

The appellants' arguments on appeal

The appellants advanced two main arguments. Their primary position was that section 1(3) should be interpreted as negating any trust finding, thereby deeming Ms. Hsia the legal and beneficial owner of her entire 95% interest and limiting ATT to Mr. Chuang's 5% registered interest only. Alternatively, they argued that section 2.02(5)(b), not (a), should govern, contending that Ms. Hsia should be viewed as wearing "two hats"—one as trustee and another in her own capacity. They asserted the taxable transaction involved three transferees: Mr. Chuang as a foreign national with a 5% interest; Ms. Hsia in her capacity as trustee with a 35% interest; and Ms. Hsia in her personal capacity as a Canadian with a 60% interest—resulting in ATT payable on 40% of the property's fair market value. The appellants contended that the purpose of the ATT provisions was not only to discourage foreign ownership but ultimately to make housing more affordable for Canadians, and therefore the provisions should not apply ATT to Canadian property owners.

The Court of Appeal's analysis and reasoning

The Court of Appeal rejected both arguments, emphasizing that tax statutes require careful attention to textual interpretation, particularly when the statutory language is clear and precise. The Court found that it is plain from the language and scheme of the ATT provisions that the legislature expressly contemplates a Canadian transferee being liable for ATT as a taxable trustee. The definition of "taxable trustee" captures both a foreign entity and a Canadian entity holding some interest in property in trust for a foreign entity. The Court noted that the taxable trustee provisions recognize that to achieve the aim of the ATT, the scheme needs to prevent tax avoidance by foreign investors who own beneficial interests held indirectly by others. The Court also determined that section 1(3) is properly interpreted as applying after ATT is found payable and the taxable amount determined under section 2.02(5)(a). Its effect is quite the opposite of what the appellants say it is: section 1(3) supports or confirms the amount on which ATT is levied—in the case of a taxable trustee, the fair market value of their registered interest. The Court noted that interpreting section 1(3) as "deeming away" findings of a trust or taxable trustee would render the language and scheme of the taxable trustee provisions meaningless.

The ruling and outcome

The Court of Appeal unanimously dismissed the appeal, with Justice Fleming writing the reasons and Justices Fenlon and MacNaughton concurring. The Court confirmed that section 2.02(5)(a) applies because both transferees—Mr. Chuang as a foreign national and Ms. Hsia as a taxable trustee—fall within the categories specified in that provision. Consequently, ATT is payable on the fair market value of the whole property, based on Ms. Hsia's 95% registered interest and Mr. Chuang's 5% interest. The Court acknowledged the appellants may view this outcome as profoundly unfair but noted that had they registered their interests on title in accordance with their respective contributions, ATT would only have been payable on 40% instead of 100% of the market value of the property. No specific monetary amount was determined in this judgment as it concerned the interpretation of tax liability provisions; the Minister had previously affirmed that ATT was payable on the declared, not the assessed, fair market value.