DATE: 20051214

DOCKET: C43735

COURT OF APPEAL FOR ONTARIO

RE:

WOODBINE CACHET WEST INC. (Appellant) –and- THE MINISTER OF FINANCE (Respondent)

BEFORE:

CRONK, ARMSTRONG and LANG JJ.A.

COUNSEL:

Colin P. Stevenson

for the appellant

Dona M. Salmon

for the respondent

HEARD:

November 25, 2005

On appeal from the judgment of Justice Janet Wilson of the Superior Court of Justice, dated January 12, 2005.

E N D O R S E M E N T

[1] The appellant appeals from the judgment of Wilson J. that dismissed both the appellant’s Rule 20 motion for summary judgment and the appellant’s appeal from the decision of the Minister of Finance, whereby the Minister assessed land transfer tax against the appellant in the sum of $290,461.53 pursuant to the provisions of the Land Transfer Tax Act, R.S.O. 1990, c. L.6, as amended.

[2] The dispute involves the amount of land transfer tax payable on the registration of a transfer of land. While the land transfer tax affidavit registered with the transfer showed consideration of only $6,172,800, the underlying agreement of purchase and sale disclosed a purchase price of $20,000,000. The appellant argues that the tax should be calculated on the $6,172,800 figure, while the Minister argues that it should be calculated on the $20,000,000 figure.

[3] 404 Woodlands Business Park Limited (Woodlands) was the registered owner of lands allegedly held by it as trustee for two groups of corporate beneficiaries: the 69.136% group and the 30.864% group. The Bank of Nova Scotia (BNS) held a mortgage on the lands. When Woodlands fell into default on the payment of its debt to BNS, the BNS, acting under a power of sale, transferred the lands to Woodbine Cachet West Inc. (Woodbine). Woodbine asserted that, thereafter, it held the lands as trustee for the 69.136% group. Woodbine maintained that, under the conveyance from the BNS, the 69.136% group merely increased its holdings by acquiring the interest of the 30.864% group in the lands through the mechanism of the power of sale.

[4] Woodbine argued that this transaction was “a transfer from a trustee to another trustee” within the meaning of s. 1(f) of the Act because the BNS merely acted as Woodlands’ attorney in making the transfer to Woodbine. Accordingly, Woodbine argued that it should only pay tax on the value of the increased holding acquired by the 69.136% group, namely, on the sum of $6,172,800.

[5] The Minister disagreed and assessed land transfer tax on the full amount of the purchase price set out in the agreement of purchase and sale, in the sum of $20,000,000. Woodbine appealed. Under s. 14(6) of the Act, an appeal from an assessment by the Minister is deemed to be an action in the Superior Court of Justice. Woodbine then moved unsuccessfully for summary judgment. The motion judge not only dismissed Woodbine’s motion but, as well, dismissed its appeal.

[6] In our view, the motion judge was correct to dismiss the summary judgment motion but erred in dismissing the appeal. We say this for three reasons.

[7] First, the question of whether the conveyance at issue constituted “a transfer from a trustee to another trustee” within the meaning of s.1(f) of the Act can only be answered after a consideration of the full factual context of this transaction. A trial is necessary to provide the factual record required for the interpretation of the applicable documents and the relevant provisions of the Act.

[8] Second, to engage the tax exemption under s. 1(f) of the Act, Woodbine is obliged to demonstrate that the beneficial owners of the lands in question were the same before and after the conveyance by the BNS. Although the Minister argues that the beneficial ownership of the lands is irrelevant because, the Minister asserts, the beneficial owners’ interest in the lands was extinguished in the power of sale proceedings conducted by the BNS, this is far from clear at this early stage of Woodbine’s appeal. If this position is rejected, the beneficial ownership of the lands, which appears to be in dispute, is directly relevant to Woodbine’s ability to invoke s.1(f) of the Act. In this event, the material facts in dispute require a trial.

[9] Finally, the interpretation of the phrase “value of the consideration”, as it appears in s. 2(1) and as defined in s. 1(f) of the Act, appears to be a matter of first impression in this court. In our view, the motion judge erred in deciding a significant question about the interpretation of the Act in the context of a Rule 20 motion. See Romano v. D’Onofrio, 2005 43288 (ON CA), [2005] O.J. No. 4969 at paras. 7 and 9 (C.A.).

[10] Accordingly, the appeal is allowed, in part, and the dismissal of the appellant’s appeal of the Minister’s decision is set aside. The appellant is entitled to its costs fixed in the amount of $4,672.30, inclusive of disbursements and Good and Services Tax.

“E.A. Cronk J.A.”

“Robert P. Armstrong J.A.”

“S.E. Lang J.A.”