DATE: 20021125
DOCKET: C36800
COURT OF APPEAL FOR ONTARIO
CATZMAN, ABELLA and CHARRON JJ.A.
B E T W E E N :
THE MINISTER OF FINANCE
Appellant
- and -
THE UNIVERSITY OF WATERLOO
Respondent
Counsel: Anita C. Veiga-Minhinnett, for the appellant Louise R. Summerhill, for the respondent
Heard: October 10 and 11, 2002
On appeal from the Reasons for Judgment of the Honourable Justice John C. Wilkins of the Superior Court of Justice dated July 11, 2001 at Toronto.
ABELLA J.A.:
[1] In Ontario, the governing body of a religious, charitable or benevolent organization is entitled to a rebate of retail sales tax in respect of a capital investment involving the construction of a building or structure. No such rebate, however, is available if the building or structure is a university. The issue in this appeal is whether a capital investment a in student residence on the campus of a university qualifies for the rebate.
BACKGROUND
[2] The parties brought a motion under Rule 22.01 of the Rules of Civil Procedure in the form of a special case to determine whether the University of Waterloo was entitled to a rebate of $279,486.84 under the Retail Sales Tax Act, R.S.O. 1990, c. R.31, as amended and ss.19(1) of the O. Reg. 904, as amended. The facts underlying the motion were agreed by the parties to be the following:
I. THE PARTIES
The Appellant is the University of Waterloo (the “Appellant”). It was incorporated under The Corporations Act, 1953 by letters patent bearing the date of April 4, 1956. It was granted university status in the Province of Ontario by way of An Act Respecting the University of Waterloo, S.O. 1959, c. 140.
The Appellant holds a vendor permit number 40803635 issued pursuant to the provisions of the Retail Sales Tax Act, R.S.O. 1980, c. 454, as amended (the “Act”).
During the Relevant Period, the Appellant was a “university”, as defined in O. Reg. 904 made pursuant to the Act.
During the Relevant Period, the Appellant was a “religious charitable or benevolent organization”, as defined in O. Reg. 904 made pursuant to the Act.
The Respondent, the Minister of Finance (formerly the Minister of Revenue) (the “Respondent”) is the Minister of the Crown responsible for the administration of the Act.
II. RELEVANT FACTS
During the period commencing January 23, 1986 and ending on April 28, 1989 (the “Relevant Period”), the Appellant purchased tangible personal property pursuant to contracts which it entered into for the construction of the Columbia Lake Townhouses (the “Residence”). The Residence is located on the Appellant’s campus. …
There are no teaching facilities connected to the Residence.
By way of two General Applications for Refund of Retail Sales Tax dated May 8, 1991 and July 10, 1991 (the “Applications”) in the respective amounts of $148,371.26 and $38,590.26, the Appellant sought a rebate of retail sales tax pursuant to s. 19 of O. Reg. 904 made under the Act. …
Following an audit of the Applications which included a physical tour of the Residence, the Respondent approved the two Applications. The Respondent paid the refund in the amount of $279,486.84 to the Appellant. …
Subsequent to the Respondent’s payment of this refund to the Appellant, it issued a Notice of Assessment (the “Assessment”) dated January 31, 1992 advising that the refund was paid in error and that an assessment of $279,486.84 was due from the Appellant. …
Pursuant to s. 24 of the Act, the Appellant filed a Notice of Objection dated April 28, 1992. …
By Decision issued on October 29, 1993, the Respondent confirmed the Assessment in the amount of $279,486.84, pursuant to ss. 24 (4) of the Act. …
Pursuant to s. 25 of the Act, the Appellant filed a Notice of appeal dated January 21, 1994. …
Pursuant to s. 26 of the Act, the Respondent filed an Amended Reply of the Minister on September 10, 1997. …
III. QUESTION
- The questions for the opinion of the Court are:
(a) During the Relevant Period, was the Appellant eligible for a rebate of the retail sales tax paid in respect of its purchases of tangible personal property that entered into and became a part of the construction of the Residence of the Appellant, pursuant to clause 45 (1) (d) of the Act, and ss. 19 (1) of O. Reg. 904, as amended?
(b) If the answer to question 16 (a) above is yes, is the Residence a building or structure that is a university, such that the rebate pursuant to clause 45 (1) (d) of the Act is not applicable?
RELEVANT PROVISIONS
[3] The Retail Sales Tax Act, 1960-61, S.O. 1960-61, c.91, received royal assent on March 29, 1961.
[4] During the Relevant Period, the rebate provision in the Retail Sales Tax Act was as follows:
45 (1): For the purpose of carrying into effect the provisions of this Act according to their true intent and of supplying any deficiency therein, the Lieutenant Governor in Council may make regulations as are considered necessary and advisable.
(2) Without limiting the generality of subsection (1), the Lieutenant Governor in Council may make regulations,
(d) providing for the rebate of the tax in whole or in part to,
(i) the governing body of any religious, charitable or benevolent organization in respect of tangible personal property entering into capital investment by such organization,
and prescribing the terms and conditions under which such rebates may be made.
[5] The relevant Regulations promulgated pursuant to subclause 45 (2) (d) (i) were:
O. Reg. 591/84 – Applicable to the time period January 23, 1986 to November, 1987.
19 (1) The Minister may rebate to the governing body of a religious, charitable or benevolent organization, in respect of tangible personal property that enters into and becomes a part of the construction on land of a building or structure of such organization, except a building or structure that is,
(a) a hospital or nurses’ residence;
(b) a school or university; or
(c) owned, or upon completion will be owned, by a municipality or local board,
an amount calculated as provided in subsection (2) or (3), as the case may be
(2) Where the members of the religious, charitable or benevolent organization purchase the materials and perform the work themselves, the amount of the rebate shall comprise the total amount of tax paid on materials that are purchased and that are incorporated into the building or structure.
R.R.O. 1980, Reg. 904, ss. 19 (1), as amended.
O. Reg. 631/87 – Applicable to the time period November 1987 to April 1989.
19 (1). The Minister may rebate to the governing body of a religious, charitable or benevolent organization, in respect of tangible personal property that enters into and becomes part of a building or structure of such organization, an amount calculated as provided in subsection (2) or (3), as the case may be.
(1a) Subsection (1) does not apply with respect to a building or structure that,
(a) is a university;
(b) is a school, as defined in subparagraph i, ii or iii of paragraph 53 of section 1;
(c) is a hospital or nurses’ residence; or
(d) is owned, or upon completion will be owned, by a municipality or local board.
(2) [same as O. Reg. 591/84]
R.S.O., 1980, Reg. 904, ss. 19 (1) and (1a) as amended.
[6] The term “capital investment” was defined throughout the Relevant Period as follows:
“capital investment” of a religious, charitable or benevolent organization means the result of any construction project that, when complete, is real property …
R.S.O. 1980, Reg. 904 s. 1 (7), as amended.
[7] From January 23, 1986 to July 7, 1987, the term “university” was defined for purposes of the Act and the Regulation as follows:
61a. “university” means a post-secondary educational institution that is, by an Act of the Assembly, authorized to grant degrees and includes a college of agricultural technology and Ryerson Polytechnical Institute and, for the purposes of section 19, includes a community college.
O. Reg. 232/86, ss. 1 (3)
[8] From July 7, 1987 to April 28, 1989, the term “university” was defined as follows:
61a. “university” means a post-secondary educational institute that is, by an Act of the Assembly, authorized to grant degrees and includes a community college, a college of agricultural technology and Ryerson Polytechnical Institute.
O. Reg. 403/87, ss. 1 (4)
[9] For purposes of this appeal, the parties agree that there is no substantive difference between the two relevant definitions of the term “university”.
DECISION OF MOTIONS JUDGE
[10] The motions judge concluded that the University of Waterloo, as a charitable organization, was eligible for a rebate for the construction of a student residence because the residence was a capital investment by a charitable organization. Moreover, the motions judge held that the residence, a “building or structure”, was not excepted from the rebate provisions as a university, since “university” is defined by the Regulation as being an authorized degree-granting, post-secondary educational institution. He concluded that since the student residence itself is not a degree-granting institution, it is not a university, and since none of the exceptions to the tax exemption applies, the University of Waterloo is entitled to a rebate for the student residence. This is an appeal by the Minister of Finance from that decision.
POSITION OF THE PARTIES
[11] The Minister of Finance does not take the position that the University of Waterloo, as a charitable organization, is precluded from receiving a rebate simply by reason that it is also a “university”. The Minister submits, however, that the respondent can only be eligible for a rebate if it made the capital investment in question in its capacity as a charitable organization. The Minister submits that there was no evidence to support the finding that the construction of the student residence was a capital investment of the respondent as a charitable organization. On the contrary, the evidence shows that the student residence forms part of the respondent organization as a university. The Minister submits that it is clear on reading the relevant legislative provisions, particularly in light of their history, that governing bodies of universities are no longer entitled to a rebate. The Minister submits further that the respondent, even if acting in its capacity as a charitable organization, is not exempted from retail sales tax in respect of a capital investment in a building or structure that is a “university”. Such capital investment is clearly excepted from the exemption under the regulation.
[12] The respondent takes the position that its status as a charitable organization is sufficient to bring itself within the scope of the exemption. The respondent submits further that the motions judge was correct in concluding that the student residence was not a “university” within the meaning of the regulation.
ANALYSIS
[13] There is no question that the University of Waterloo is a charitable organization within the meaning of the applicable legislative provisions. There is also no question that the construction of the student residence satisfied the definition of “capital investment”. However, it is equally clear that the respondent is also a university within the meaning of the regulation. While the University may not be precluded from claiming the rebate by reason only that it is also a university, its dual status cannot simply be ignored in the context of these legislative provisions. It is clear from reading the applicable regulations as a whole, particularly given their history, that the Legislature intends to except governing bodies of universities from the scope of the tax exemption. With respect, it is my view that the approach adopted by the motions judge does not give effect to this clear intention.
[14] Section 19 (1) of the Regulations is, in both relevant formulations, a two-part provision responding to the authority in s. 45 (2) (d) (i) of the Act to permit retail sales tax rebates for capital investments by the governing body of religious, charitable or benevolent organizations. Section 19 (1) of the Regulation states that the Minister may rebate to the governing body of a religious, charitable or benevolent organization in respect of personal property that becomes part of a building or structure of such organization. The exception is then stated to be a “building or structure” that is a school, hospital, or university.
[15] It seems to me that when the exception is stated to be a “building or structure” that “is a university”, one should not interpret the words “building or structure” in artificial isolation from their appearance elsewhere in the rebate provision. To interpret the words “building or structure” in the context of the exceptions to rebate entitlement, one must first see how the same words are used when rebate entitlement is stipulated. The entitlement is to the governing body of a charitable organization in respect of a building or structure of such an organization. The exception to this rebate entitlement, therefore, is, similarly, for buildings or structures of a charitable organization that is a university, school, hospital, or nurses’ residence.
[16] This interpretation is reinforced by the legislative history. Initially, rebates under the Act were available for the construction of buildings not only of religious, charitable or benevolent organizations, but also of hospitals, nurses’ homes, schools, universities, municipal corporations or local boards.
[17] It is helpful to set out some of the language used by the Legislature when it intended to exempt capital investments in university buildings from the tax. The rebate provision first appeared in the original Retail Sales Tax Act, 1960-61, S.O. 1960-61, c.91, at s. 39 (2) (e) (i) and (ii). Section 39 (1) gave the Lieutenant Governor In Council the power to make regulations as necessary. Subsection 39 (2) authorized the Lieutenant Governor to make regulations:
e) …providing for the rebate of tax in whole, or in part, to:
i) the governing body of any religious, charitable or benevolent organization in respect of tangible personal property entering into capital investment by such organization,
ii) the governing body of any hospital, nurses’ home, school or university in respect of tangible personal property purchased by such governing body that enters directly into and becomes part of the construction of a hospital, nurses’ home, school or university building.
i) a municipal corporation …
[18] In 1962, the Minister promulgated regulation O.Reg. 114/62, which specified in s. 20 (2) that:
The Treasurer may pay to the governing body of a religious, charitable or benevolent organization or of a hospital, nurses’ home, school or university in respect of tangible personal property that enters into and becomes part of the construction on land of a building or structure of such organization, hospital, nurses’ home, school or university an amount calculated as provided in subsection 4.
[19] The wording of these provisions was fine-tuned over the years. Essentially, however, the rebate remained in place for religious, charitable or benevolent organizations, hospitals, nurses’ homes, schools, universities, and municipal corporations until 1982, as the following demonstrate:
s. 4 of the Retail Sales Tax Amendment Act, 1964, S.O. 1964, c. 104; adding the following paragraph to the Retail Sales Tax Act, 1960-61, as amended:
- tangible personal property that was purchased in good faith pursuant to a contract entered into on or after the 1st day of June, 1964 for use exclusively and not for resale by the governing board of a hospital, nurses’ residence, school or university and that will be incorporated into and form part of the nurses’ residence, school or university building.
s. 45 (2) (d) (ii) of the Retail Sales Tax Act, 1980, R.S.O. 1980, c. 454:
45(2)(d)(i) the governing body of any religious, charitable or benevolent organization in respect of tangible personal property entering into capital investment by such organization;
(ii) the governing body of any hospital, nurses’ residence, school or university in respect of any tangible property that is purchased by such governing body pursuant to a contract entered into on or before the 31st day of May, 1964 and that enters directly into and becomes part of the construction of a hospital, nurses’ residence, school or university building, where the personal property in respect of which the rebate as claimed was not purchased exempt from tax under this Act;
s. 2(3) of the Retail Sales Tax Amendment Act, 1981, S.O. 1981, c.38 repealing subsection 5(1) of the Retail Sales Tax Act, R.S.O. 1980, c.454 and substituting the following:
- tangible personal property that enters directly into and becomes part of real property that is a building or structure and that, upon completion is owned by the governing body of a public hospital, school or university and used for school, university or hospital purposes, including nurses’ residence, if the cost of such tangible personal property is shown to have been directly and substantially borne by the school, university or public hospital, or the governing board thereof, that owns the building or structure into the construction of which such tangible personal property entered [emphasis added].
[20] There is no dispute that when the exemption applied to universities, it included university buildings like student residences and there was no need to name those residences separately.
[21] The exemption for universities, hospitals, nurses’ homes, schools and municipal corporations continued until 1982, when section 3 (19) of The Retail Sales Tax Amendment Act, 1982, S.O. 1982, c. 36 repealed paragraph 5 (1) 68 of The Retail Sales Tax Act, R.S.O. 1980, C. 454. This, along with an earlier amendment (the repeal of s. 45 (2) (d) (ii) via S.O. 1981, C. 38) meant that all that remained in the Retail Sales Tax Act about the rebate was s. 45 (2) (d) (ii), stating that the Lieutenant Governor could make regulations:
d) providing for the rebate of the tax in whole or in part to,
i) the governing body of any religious, charitable or benevolent organization in respect of tangible personal property entering into capital investment by such organization … and prescribing the terms and conditions under which such rebates may be made …
As such, the only rebate left was in s. 45 (2) (d) (i) for religious, charitable or benevolent organizations.
[22] The language repealing the exemption is instructive. Section 3 of Ontario Regulation 334/83 reads:
- Subsection 19(1) of the said Regulation is revoked and the following substituted therefor:
(1) The Minister may rebate to the governing body of a religious, charitable or benevolent organization an amount calculated as provided in subsection (2) in respect of tangible personal property that enters into and becomes part of the construction on land of a building or structure of such organization other than a public hospital, school or university [emphasis added].
[23] The subsequent amendments to s. 19 (1), including those applicable to these proceedings, should be interpreted in light of this legislative history. I view the legislative history not so much as providing interpretive assistance into an ambiguous provision, but more as illuminating and confirming the interpretation a plain reading of the provision yields, namely, that just as once the governing body of a university was entitled to an exemption from retail sales tax for all capital investments in its buildings or structures, now it is entitled to an exemption for none of them.
[24] This symmetrical approach to what the Legislature was targetting in both granting and removing the exemption, is based on common sense. There is no reason to presume that when the Legislature intended to benefit universities by exempting them from retail sales tax, it thought of them holistically, but that when it intended to deprive the same institution of this very benefit, it had a much narrow institutional framework in mind.
[25] Having originally intended to benefit the whole institution by exempting it from the payment of retail sales tax for the construction of its buildings and structures, the Legislature decided in 1982 to retract that benefit. There is no basis for assuming that the Legislature did not have the same institutional scope in its sights both times.
[26] The wording of the exemption for universities was for the construction of a building or structure that is “part of” a university or university building. The wording of the denial of entitlement to the rebate was, originally, in respect of tangible personal property that becomes “part of … a building or structure of [a religious, charitable or benevolent organization] other than a … university”. The wording in the applicable incarnations of s. 19 (1) says essentially the same thing, namely, that a rebate is available to a governing body in respect of tangible personal property that becomes “part of … a building or structure of [a religious, charitable or benevolent organization], except a building or structure … that is … a university”. Unless “university” is given a literal definition that guts it of its true institutional meaning, the provision clearly means that the governing body of a university is not entitled to a rebate for any of its buildings or structures.
[27] A university, that is, a post-secondary, degree-granting institution, is not just a collection of lecturing facilities. To perform its educational role leading to the conferral of a degree, it contains diverse buildings and structures to accommodate the diversity of functions and needs of its constituent student, faculty, and administrative parts. Universities have, in short, many structural components on their campuses, each of which contributes to the capacity of the university to fulfil its educational and ultimate degree-granting function. Historically, these have included, among others, buildings such as libraries, gymnasiums or student residences, each structural affiliates of the university’s educational function and overseen by the governing body of the entire institution.
( See Yale University v. Town of New Haven 71 Conn. 316; 42 A.87; 1899 Conn.; The Church Divinity School of the Pacific v. County of Almaeda et al. Berkeley Baptist Divinity School v. City of Berkeley et al. The Pacific School of Religion v. City of Berkeley et al, 152 Cal. App. 2d 246; 314 P.2d 209; 1957 Cal App; Re University of Ottawa and City of Ottawa, [1969] 2 O.R. 382 (Co. Ct.); Governors of Acadia University v. Town of Wolfville (1971), 29 D.L.R. (3d) 441 (N.S.S.C.); St. John’s Ravenscourt School v. Metropolitan Winnipeg (1965), 49 D.L.R. (2d) 662 (Man. Q.B.); University of Windsor v. Ontario (RAC, No.37) (1992), 94 D.L.R. (4th) 328 (Ont. Ct. Gen. Div.);
University of Windsor v. City of Windsor Assessment Commissioner, [1965] 2 O.R. 455 (Co. Ct.).
[28] Hospitals, on the other hand, sometimes do have residences for nurses, but it is by no means an institutional expectation or requirement. Nor, unlike student residences, is it clear that nurses’ residences and hospitals are run by the same governing body. The fact that the Legislature specifically mentioned nurses’ homes in addition to hospitals demonstrates that nurses’ residences were not otherwise necessarily perceived to be part of hospitals. To ensure their entitlement to the rebate, therefore, nurses’ homes were separately designated. University residences, on the other hand, were not specifically mentioned because there was no need to mention the obvious.
[29] Even looking at the definition of “university” in the Act, one would not easily say the exclusion applies to student residence. The definition in the Act of “university” is, after all, a post-secondary educational institution. A university is the sum of its parts, not just its parts. It therefore makes sense to read the provision in a way that takes account of what a university is – an educational, degree-granting institution with a number of buildings or structures related and relevant to its educational, degree-granting function.
[30] To otherwise interpret “university” means that since the university is unarguably a charitable organization, the buildings or structures in which teaching or degree-granting takes place would not enjoy the benefit of a rebate, but structures like an administrative building, parking garage, or physical plant would be entitled to a rebate. I see no basis for such an artificial truncation of a well-understood institutional concept. Since the Legislature has seen fit to deny rebates to the educational, degree-granting institution, it is difficult to see why it would want nonetheless to benefit those buildings that, while part of that institution, do not contain teaching facilities.
[31] This approach is supported by the fact that it is the governing body that is entitled to, or denied the right to, a rebate, that is, the governing body of the whole of a designated organization, not just a part like a student residence. When one speaks of the governing body of a university, one speaks not of the governing body of its various buildings, but of the university as a whole.
[32] Moreover, a student residence of a university cannot at the same time purport to be part of a university and therefore entitled to the charitable status of the institution, while disaffiliating itself from the same organization for purposes of claiming a rebate. The student residence does not, on its own, have charitable status. It has so only as part of the university, the very charitable organization specifically designated by the Regulation not to qualify for a rebate.
[33] I would therefore allow the appeal with costs fixed in the amount of $10,000, set aside the order of Justice Wilkins and conclude that the University was not eligible for the rebate for the student residence. Having answered the first question in the negative, it is unnecessary to answer the second.
RELEASED: “MAC” “R.S. Abella J.A.”
“NOV 25 2002” “I agree: M.A. Catzman J.A.”
“I agree Louise Charron J.A.”