CITATION: Woodbine Cachet West Inc. v. Ontario (Finance), 2007 ONCA 809

DATE: 20071126

DOCKET: C46255

COURT OF APPEAL FOR ONTARIO

O’CONNOR A.C.J.O., GILLESE and WATT JJ.A.

BETWEEN:

WOODBINE CACHET WEST INC.

Appellant

And

THE MINISTER OF FINANCE

Respondent

Colin P. Stevenson for the appellant

Dona M.H.Y. Salmon for the respondent

Heard: November 21, 2007

On appeal from the judgment of Justice James Spence of the Superior Court of Justice dated October 25, 2006.

ENDORSEMENT

[1] 404 Woodlands Business Park Limited (“404”) was the registered owner of certain lands. It held the lands as bare trustee for two groups of corporate beneficiaries which are referred to as the 69% group and the 31% group. The Bank of Nova Scotia held a mortgage on the lands. 404 defaulted on the mortgage.

[2] The Bank exercised its power of sale under the mortgage and sold the land to Woodbine Cachet West Inc., the appellant. The purchase price of the land, as specified in the agreement of purchase and sale, was twenty million dollars.

[3] Woodbine acquired the land as trustee for the members of the 69% group. After the purchase, the 69% group was entitled to 100% of the beneficial interest in the lands. Woodbine maintained that the effect of the sale was to transfer the interest of the 31% group to the 69% group. Consequently, Woodbine contended that land transfer tax should be paid only on the 31% increase in beneficial interest. That is, land transfer tax should be paid on $6.172 million rather than on $20 million. The transfer deed reflected a consideration of $6.172 million.

[4] The Minister did not accept Woodbine’s arguments and assessed land transfer tax, pursuant to the Land Transfer Tax Act, R.S.O. 1990, c. L.6, as amended (the “Act”), based on the purchase price of $20 million.

[5] Woodbine appealed the Minister’s assessment.

[6] By judgment dated October 25, 2006, Spence J. dismissed Woodbine’s appeal.

[7] Woodbine brings a further appeal to this court.

[8] We would dismiss the appeal. In our view, the appeal judge correctly concluded that Woodbine should pay land transfer tax on 100% of the value of the consideration of $20 million.

[9] We fully endorse the reasons of the appeal judge. In brief compass, he reasoned as follows. In order to determine the effect of the sale transaction for the purposes of determining land transfer tax, it is necessary to address the fact that the sale was affected by the Bank, as mortgagee, through the exercise of its power of sale under the mortgage. By reason of granting the mortgage to the Bank, 404 retained only its interest in the equity of redemption. The exercise of the power of sale extinguished that interest. When the Bank exercised its power of sale, it did so for its own benefit. It was not acting as agent for 404 or anyone else. He rejected the arguments to the effect that the land transfer tax should be based on a figure that excluded the portion of the $20 million that might be attributable to the interest of the 69% group[^1]. He concluded:

The purchase price agreed in the agreement of purchase and sale is twenty million dollars. On the evidence, [Woodbine] as trustee for the 69% group, undertook a mortgage obligation to [the Bank] which includes the 20 million dollars that is referable to the sale transaction. The value of the consideration for Land Transfer Tax is accordingly twenty million dollars.

[10] Although the appeal judge did not expressly refer to s. 2(1) of the Act, it is clear that his reasoning is based on it.

[11] The relevant part of s. 2(1) of the Act read as follows, at the relevant time:

2. (1) Every person who tenders for registration in Ontario,

(a) a conveyance by which any land is conveyed to or in trust for a transferee who is not a non-resident person; …

shall, before the conveyance is registered, pay a tax computed,

(c) at the rate of,

(i) one-half of 1 per cent of the value of the consideration for the conveyance up to and including $55,000,

(ii) 1 per cent of the value of the consideration which exceeds $55,000 up to and including $250,000, and

(iii) 1.5 per cent of the clue of the consideration which exceeds $250,000; and

(d) where the value of the consideration for the conveyance exceeds $400,000 and the conveyance is a conveyance of land that contains at least one and not more than two single family residences, an additional tax of one-half of 1 per cent of the amount by which the value of the consideration exceeds $400,000.

[12] In s. 1(1) of the Act, “value of the consideration” is defined to include:

(a) the gross sale price or the amount expressed in money of any consideration given or to be given for the consideration by or on behalf of the transferee and the value expressed in money of any liability assumed or undertaken by or on behalf of the transferee as part of the arrangement relating to the conveyance and the value expressed in the money of any benefit of whatsoever king conferred directly or indirectly by the transferee on any person as part of the arrangement relating to the conveyance.

[13] It is clear from the reasons of the appeal judge that he found that the gross sale price of twenty million dollars was the value of the consideration given for the conveyance. He was correct in holding that land transfer tax was to be calculated on that basis.

[14] Accordingly, we would dismiss the appeal with costs to the Minister fixed at $5,700, all inclusive.

RELEASED: November 26, 2007 (“DOC”)

“Dennis O’Connor A.C.J.O.”

“E.E. Gillese J.A.”

“David Watt J.A.”

[^1]: For the same reasons, we reject the submission that the statement in the agreement of purchase and sale stipulating the consideration for the purpose of calculating land transfer tax was $6,172,800.00.