DOCKET: C38519
COURT OF APPEAL FOR ONTARIO
GOUDGE, BORINS AND ARMSTRONG JJ.A.
B E T W E E N:
SUNNYBROOK AND WOMEN’S COLLEGE HEALTH SCIENCES CENTRE
Barry Glaspell and Adam Dodek for the appellant
Applicant (Appellant)
- and -
HER MAJESTY THE QUEEN IN RIGHT OF ONTARIO (through her representative, the Minister of Finance)
Lynn K. Tosolini for the respondent
Respondent (Respondent in Appeal)
Heard: January 21, 2003
On appeal from the judgment of Justice Nancy L. Backhouse of the Superior Court of Justice dated June 20, 2002.
1The appellant came into existence on June 26, 1998, as a result of the Sunnybrook and Women’s College Health Sciences Centre Act, 1998, S.O. 1998, c. 12 (the SWC Act). Section 21 of that Act provides in part that the appellant’s property “shall not be liable to taxation for provincial purposes …”
2Effective December 5, 2001 the respondent amended the Retail Sales Tax Act, R.S.O. 1990, c. R.31 (the RST Act) by adding s. 1.1 to that Act. It reads as follows:
1.1 No person otherwise subject to tax under this Act is exempt therefrom by reason of an exemption granted to the person, or to or in respect of the personal or real property of the person, by or under any other Act, unless the other Act expressly mentions this Act.
3The question in this appeal is whether this amendment removed the appellant’s protection against having to pay retail sales tax.
4Backhouse J. found that it did so. For the reasons that follow, I agree and would therefore dismiss the appeal.
THE FACTS
5The appellant was created in 1998 by the coming together of three predecessor hospitals: Sunnybrook Hospital, the Orthopaedic and Arthritic Hospital, and Women’s College Hospital. This was effected through the SWC Act, by which Sunnybrook Hospital and the Orthopaedic and Arthritic Hospital were amalgamated and continued as the appellant, and the rights, obligations, assets and liabilities of Women’s College Hospital were transferred to the appellant.
6Sunnybrook Hospital began as a veterans’ hospital. It was built by the federal government and operated by it until it was transferred to provincial jurisdiction pursuant to The Sunnybrook Hospital Act, 1966, S.O. 1966, c. 150. Section 10(3) of that Act provided the following:
10.(3) The real and personal property vested in Sunnybrook Hospital and any lands and premises leased to or occupied by Sunnybrook Hospital shall not be liable to taxation for provincial, municipal or school purposes, and shall be exempt from every description of taxation so long as the same are actually used and occupied for the purposes of Sunnybrook Hospital.
7In 1995, a dispute arose between the respondent and Sunnybrook Hospital over whether s. 10(3) exempted the latter from retail sales tax. Sunnybrook Hospital commenced a motion for a declaration that it was exempt, which was heard together with a similar motion brought by the Ontario Cancer Institute. The motion judge, Lederman J., issued reasons for judgment on August 26, 1997, which are reported as Ontario Cancer Institute v. Ontario (Minister of Revenue) (1997), 1997 12319 (ON SC), 150 D.L.R. (4th) 351 (Ont. Gen. Div.). He concluded that the wording of s. 10(3) was sufficiently broad to relieve Sunnybrook Hospital from retail sales tax under the RST Act. Because the parties had confined the issue before him to liability for retail sales tax on goods or personal property consumed or used, Lederman J. limited his declaration to that. He did not deal with the question of liability for retail sales tax on services or on insurance premiums which the RST Act also covers. That question is the subject of other proceedings, which have yet to be heard at first instance.
8On September 22, 1997, the respondent filed a notice of appeal from the decision of Lederman J.
9On June 26, 1998, Sunnybrook Hospital’s exemption from taxation in s. 10(3) of The Sunnybrook Hospital Act, 1966 was carried forward virtually verbatim as s. 21(1) of the SWC Act. Added to it was a second provision exempting any transfer of property from Women’s College Hospital to the appellant from both retail sales tax and land transfer tax. Section 21 of the SWC Act provided as follows:
(1) All real and personal property vested in the corporation and all lands and premises leased to or occupied by the corporation shall not be liable to taxation for provincial, municipal or school purposes, and shall be exempt from every description of taxation so long as the same are actually used and occupied for the purposes of the corporation.
(2) The Retail Sales Tax Act and the Land Transfer Tax Act do not apply to any transfer of property under subsection 4(1).
10On November 12, 1998, the respondent abandoned its appeal from the judgment of Lederman J.
11By letter to the appellant dated December 22, 1999, the respondent acknowledged that the appellant was not liable to pay retail sales tax on its purchases of personal property. Over the next two years, the respondent gave no indication to the appellant that it was considering trying to reverse this position.
12However, on December 5, 2001, the government of Ontario proclaimed in force omnibus Bill 127 (Responsible Choices for Growth and Fiscal Responsibility Act (Budget Measures), 2001, S.O. 2001, c. 23). Section 189 of Bill 127 added s.1.1 to the RST Act under the heading “exemption from other acts”. At the same time, Bill 127 added a provision in identical terms to four other acts by including a new s. 1.1 in each of the Fuel Tax Act, the Gasoline Tax Act, the Tobacco Tax Act, and the Land Transfer Tax Act.
13On January 14, 2002, the respondent wrote to the appellant to say that as a result of the addition of s. 1.1 to the RST Act, the appellant was required to start paying retail sales tax as of December 5, 2001.
14In response, on January 24, 2002, the appellant issued a notice of application under Rule 14 of the Rules of Civil Procedure seeking a declaration that it continues after December 4, 2001 to be exempt from the RST Act pursuant to s. 21 of the SWC Act.
15Backhouse J. dismissed the appellant’s application. The core of her reasoning is as follows:
11With the passage of Section 1.1, a specific reference to the Retail Sales Tax Act is now required. Section 21(1) [of the SWC Act] does not include any reference to the Retail Sales Tax Act. Is the limited reference in Section 21(2) sufficient. Although Section 1.1 of the Retail Sales Tax Act is not as clearly expressed as it might be, nevertheless, it seems reasonably clear that the reference to the Retail Sales Tax Act must reflect an intention to exclude the Retail Sales Tax Act from generally applying. The intent of Section 21(2) is limited to the purposes of Section 4(1). It would not be reasonable to interpret a reference which on its face has a limited effect to create a general exclusion. In my opinion, therefore, Section 21(2) is not sufficient to attract a general exemption from the Retail Sales Tax Act.
ANALYSIS
16The respondent raises two preliminary issues which it says are fatal to the appeal.
17First it argues that the RST Act provides a complete code for determining liability to pay retail sales tax and that this precludes the appellant’s right to bring an application for a declaration pursuant to Rule 14.
18I disagree. While the RST Act sets out detailed procedures to be followed if a taxpayer objects to a particular retail sales tax assessment or seeks a refund of a payment made in error, that is not this case. The appellant seeks neither of these. Rather, it seeks a declaration that it is exempt from the RST Act altogether, because of s. 21(1) of the SWC Act and despite s. 1.1 of the RST Act. This is precisely the kind of proceeding contemplated by Rule 14.05(3) which authorizes the bringing of an application for the determination of rights that depend on the interpretation of a statute. Moreover, there is no provision in the RST Act which suggests that the procedures it contains constitute the only ways in which a taxpayer can bring a challenge of any kind to the RST Act. It was therefore entirely proper for this case to be brought as an application pursuant to Rule 14.
19The respondent’s second preliminary argument is that s. 21(1) of the SWC Act provides the appellant with no exemption from retail sales tax because the section of The Sunnybrook Act, 1966 interpreted by Lederman J. was repealed with the passage of the SWC Act and because if s. 21(1) provides a general exemption from retail sales tax, s. 21(2) would be unnecessary.
20Again, I disagree. The respondent did not take this position before the motion judge. Indeed its advice to the appellant following the passage of the SWC Act contradicts this position, when it said that the appellant was not liable to pay retail sales tax on personal property. It reversed this position only after the addition of s. 1.1 to the RST Act in December 2001. Moreover, in University Health Network v. Ontario (Minister of Finance) (2001), 2001 8618 (ON CA), 208 D.L.R. (4th) 459 (Ont. C.A.) the respondent took the position that s. 21(1) of the SWC Act constituted a tax exemption provision. Finally, in that case this court found that this section continued the exemption in The Sunnybrook Act, 1966.
21That conclusion is unassailable in my view. Section 21(1) of the SWC Act is virtually a verbatim re-enactment of s. 10(3) in the 1966 Act, the section that Lederman J. declared to provide an exemption from retail sales tax on personal property. The respondent abandoned its appeal from that judgment. Section 21(1) must be taken to provide the same exemption to the appellant as of June 26, 1998.
22Nor can it be said that the presence of s. 21(2) affects this conclusion. Section 21(2) adds a second more precise exemption from the RST Act for the transfer of property from Women’s College Hospital. The addition of this second exemption does not implicitly alter the meaning given by Lederman J. to the language that now appears in s. 21(1) namely, that it is sufficiently broad to relieve the appellant from retail sales tax on personal property.
23Thus in my view, the decision of Lederman J., the respondent’s abandonment of its appeal from it, and the re-enactment of the same statutory language in s. 21(1) of the SWC Act mean that after June 26, 1998 the appellant continued to have a general exemption from retail sales tax at least on personal property, as part of the broad exemption from taxation provided by s. 21(1).
24The central question is whether the addition of s. 1.1 to the RST Act on December 5, 2001 brought that to an end. It can be addressed only against the backdrop of the wording of these sections.
25To reiterate, s. 1.1 of the RST Act reads:
1.1 No person otherwise subject to tax under this Act is exempt therefrom by reason of an exemption granted to the person, or to or in respect of the personal or real property of the person, by or under any other Act, unless the other Act expressly mentions this Act.
26Section 21 of the SWC Act reads:
- (1) All real and personal property vested in the corporation and all lands and premises leased to or occupied by the corporation shall not be liable to taxation for provincial, municipal or school purposes, and shall be exempt from every description of taxation so long as the same are actually used and occupied for the purposes of the corporation.
21.(2) The Retail Sales Tax Act and the Land Transfer Tax Act do not apply to any transfer of property under subsection 4(1).
27The appellant puts forward two arguments. First, it says that s. 21(1) of the SWC Act has two components. The first part of the subsection confers an immunity from taxation for provincial purposes. The second part grants an exemption from tax. Since s. 1.1 of the RST Act speaks only to an “exemption” granted by any other act, it leaves unaffected the appellant’s immunity from taxation. In other words, the appellant says that s. 1.1 has no application because the appellant’s immunity means it is not a “person otherwise subject to tax” under the RST Act.
28In my view, this argument fails because in order to distinguish the first part of s. 21(1) from an exemption, the argument seeks to apply a specialized and narrow notion of immunity which cannot be sustained in the circumstances. The statutory language of the first part of the section speaks of not being liable to taxation for provincial purposes. It does not speak of an immunity from tax. In interpreting the predecessor legislation, s. 10(3) of The Sunnybrook Hospital Act, 1966, Lederman J. uses the language of exemption in describing the protection it gives from provincial tax.
29Moreover, contrary to the appellant’s submission, this statutory language could not create an immunity analogous to the doctrine of inter-governmental immunity found in s. 125 of the Constitution Act, 1867. By enacting the first part of s. 21(1), the province has not created an immunity analogous to inter-governmental immunity. It has not thereby put beyond its own power the later removal of the protection from retail sales tax. The only question is whether it has now done so, with s. 1.1 of the RST Act.
30In summary, in saying that the appellant shall not be liable to taxation and that it shall be exempt from taxation, s. 21(1) of the SWC Act is simply describing the exemption it confers in two different ways. Indeed in the New Shorter Oxford Dictionary “exempt” is defined as “grant immunity or freedom from a liability to which others are subject”. This is consistent with the overall purpose of the section, namely to provide the appellant with broad protection against taxation which must be taken to extend to a general exemption from retail sales tax on personal property.
31The appellant’s second argument is that s. 1.1 of the RST Act does not remove the retail sales tax exemption provided by s. 21(1) of the SWC Act because the SWC Act expressly mentions the RST Act in s. 21(2). In other words, the appellant says that the language chosen by the legislature in enacting s. 1.1 expressly preserves the appellant’s exemption.
32On the other hand, the respondent’s position is that while s. 1.1 of the RST Act does not remove the partial exemption from retail sales tax in s. 21(2) of the SWC Act, it does remove the general exemption from that tax provided by s. 21(1).
33The debate then is not about whether s. 1.1 of the RST Act repeals s. 21(1) of the SWC Act altogether. Setting aside retail sales tax, the broad exemption from provincial taxation provided by s. 21(1) remains unimpaired. What is at stake is whether s. 1.1 of the RST Act narrows that broad exemption to remove from it the general protection against retail sales tax.
34The answer to this question depends on the interpretation of the last phrase in s. 1.1 of the RST Act. The appellant is otherwise subject to tax under the RST Act save for the exemption given to it by s. 21(1) of the SWC Act. Section 1.1 removes that exemption unless the SWC Act “expressly mentions” the RST Act.
35I would approach this task of statutory interpretation guided by the words of Laskin J.A. in University Health Network, supra at para. 25:
The modern approach to statutory interpretation calls on the court to interpret a provision in its total context. The court’s interpretation should comply with the legislative text, promote the legislative purpose and produce a reasonable and just meaning. In short, the court must take into account all relevant indicators of legislative meaning. See Ruth Sullivan, Driedger on the Construction of Statutes, 3rd ed. (Toronto: Butterworths, 1994) at p. 131.
36Moreover as Gonthier J. said in Québec (Communauté urbaine) v. Corporation Notre-Dame de Bon-Secours, 1994 58 (SCC), [1994] 3 S.C.R. 3 at 20 the interpretation of tax legislation should follow the ordinary rules of interpretation. There can be no automatic presumption that a legislative provision purporting to remove a tax exemption must be interpreted narrowly. Such a provision must be approached like any other, and only if, in the end, there is a reasonable doubt about the legislative meaning that is not resolved by the ordinary rules of interpretation can there be recourse to a residual presumption in favour of the taxpayer.
37What then are the possible interpretations of the last phrase of s. 1.1 of the RST Act and how do they measure up, given the modern approach to statutory interpretation?
38One possibility can readily be discarded. I do not think that the phrase can encompass an express mention of the RST Act in the exempting Act where that reference has nothing whatsoever to do with an exemption from retail sales tax. Section 1.1 of the RST Act cannot have contemplated that where in an Act which inter alia grants a general exemption from retail sales tax, the legislature also expressly mentions the RST Act but for a purpose having nothing to do with exemption from retail sales tax, this intention should be transformed into one with a different purpose, namely the removal of the general exemption from retail sales tax. To interpret s. 1.1 this way would set up the capricious result that a legislative provision designed for one purpose would achieve a second purpose entirely unreflected in the provision itself.
39The interpretation urged by the appellant is that s. 1.1 removes the exemption from retail sales tax unless the exempting Act expressly mentions the RST Act in the context of some exemption from retail sales tax, but not necessarily in the context of the exemption that would otherwise be removed. In this case, the mention of the RST Act in s. 21(2) which grants a specific exemption from retail sales tax for property transferred from Women’s College Hospital would thus be sufficient to preserve the general exemption from that tax in s. 21(1).
40On the other hand, the respondent’s position is that the express mention must be in the provision which accords the exemption that would otherwise be removed. In this case that would require an express mention of the RST Act in s. 21(1) of the SWC Act.
41In my view, the proper interpretation of s. 1.1 of the RST Act is closer to that contended for by the respondent.
42I begin with the legislative text. It states that if an exempting Act is to extend to providing protection from retail sales tax, the exempting Act must “expressly mention” the RST Act. This requirement suggests that the reference must be more than a mere mention. It must be a mention expressed for a purpose of relevance in the context, namely the exemption provided by the exempting Act that is thereby preserved. Here this can only mean that the mention must express an intention to preserve the general retail sales tax exemption within the broad exemption provided by the exempting Act. In other words, I think that the text of s. 1.1 suggests that the exempting Act must mention the RST Act in a way that expresses an intention to preserve the exemption from retail sales tax that would otherwise be removed.
43In my view, this accords with the legislative purpose of s. 1.1, namely to ensure that if the legislature intends an exemption from provincial taxation to encompass retail sales tax it must expressly say so. This provision, like the others introduced at the same time for fuel tax, gasoline tax, tobacco tax and land transfer tax, is intended to ensure that a general legislative exemption from provincial tax would include these specific exemptions only if the exempting Act expresses that intention through the express mention of the particular Act.
44Moreover, this interpretation of s. 1.1 gives the provision a meaning which is reasonable and just. It is reasonable to require that if the legislature intends an exempting Act to extend to retail sales tax, it must refer to the RST Act in the exempting Act in a way that reflects this intention.
45On the other hand, it does not seem reasonable that if the legislature desires an exempting Act to provide protection from retail sales tax, this can be accomplished by a reference to the RST Act which the legislature meant to provide a different and lesser exemption.
46In summary, I interpret s. 1.1 of the RST Act to mean that if a statute is to provide a general exemption from retail sales tax, it must mention the RST Act in a way that reflects that intention.
47Applying that interpretation to the SWC Act, the result is clear. While s. 21(1) must be taken to provide a general exemption from retail sales tax, at least for personal property, there is no mention in the SWC Act of the RST Act that reflects that intention.
48The only mention of the RST Act is in s. 21(2) which reflects a different intention, namely to protect the appellant from retail sales tax, but only in connection with the transfer of property from Women’s College Hospital. Given the interpretation I have given to s. 1.1 of the RST Act, while that reference is enough to preserve the partial exemption found in s. 21(2), it is not enough to provide the general exemption from retail sales tax that, but for s. 1.1, would be provided by s. 21(1) of the SWC Act.
49In the result therefore, I would dismiss the appeal.
50At the hearing of the appeal, the parties both submitted that costs should follow the event on a partial indemnity basis. I agree. Costs to the respondent are fixed in the amount of $5,000.
Released: April 9, 2003 “STG”
“S.T. Goudge J.A.”
“I agree S. Borins J.A.”
“I agree Robert P. Armstrong J.A.”
