Court File and Parties

COURT FILE NO.: 2774/16 & 3483/16 DATE: 2018 07 05 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN: 2774/16 2137691 ONTARIO LIMITED Plaintiff – and – LUCIA PESSOA PARK Defendant

Counsel: Jeremy Sacks, for the Plaintiff Matthew Latella, for the Defendant

AND BETWEEN: 3483/16 LUCIA PESSOA PARK Plaintiff - and – 2137691 ONTARIO LIMITED Defendant

Counsel: Matthew Latella, for the Plaintiff Jeremy Sacks, for the Defendant

HEARD: February 5, March 29 and April 17, 2018

REASONS FOR JUDGMENT

Coats J.

[1] The Plaintiff, a numbered corporation, sold a property to the Defendant, Ms. Lucia Pessoa Park. The Plaintiff now brings a motion for summary judgment seeking payment of HST from the Defendant on the sale of this property. When the Agreement of Purchase and Sale (“APS”) for the property closed, the parties believed the sale was exempt from HST. The Plaintiff later took the position that HST might be due on the sale. The issue of whether or not the sale is HST exempt is disputed by the parties. Furthermore, the parties dispute who is liable to pay the HST, which if due, amounts to $364,000.

[2] Joined with the above motion, is Lucia Park’s cross-motion for summary judgment with respect to sums she says are owed to her by the numbered company for development fees associated with the property. Ms. Parks argues that under the terms of the APS, the numbered company was responsible for paying any development fees charged by the municipality. The Town of Oakville has now charged these fees.

[3] File no. 2774/16 pertains to the action for HST started by 2137691 Ontario Limited against Lucia Pessoa Park. File no. 3483/16 pertains to the action for development fees brought by Ms. Park. The materials on both motions were filed in court file no. 2774/16. 2137691 Ontario Limited, in its pleadings, requested that any development fees found owing in the cross-motion be set off against any HST owed in the original motion. The Defendant, Lucia Park, included in her motion a request to consolidate actions 3483/16 and 2774/16. This was consented to by the parties and was consistent with the manner in which both parties argued the motion and cross-motion under file number 2774/16.

[4] Because the result in the HST action would be affected by the cross-claim for development fees, and the materials for both actions were filed together, I will deal with both matters jointly in these reasons. In my view, it is not necessary to make an order for joinder as the Reasons resolve both actions on a final basis. For ease of reference, I will refer to 2137691 as the Plaintiff and Lucia Pessoa Park as the Defendant.

[5] The decision on the cross-motion provided here is binding on the parties in file no. 3483/16. This is clearly the intention of the parties.

A. Background

[6] The Plaintiff owned a large parcel of land in Oakville, Ontario, which it applied to have divided into three lots (Lot 27, 28, and 29). There was a home on the original parcel which straddled Lots 28 and 29, and an indoor pool house structure located on Lot 27, which was linked to the home by a covered hallway. The covered hallway was partially on Lot 27 and partially on Lot 28. Lot 27 was listed to be sold as vacant land.

[7] On or around March 20, 2015, the Plaintiff and Defendant executed an APS for the sale of Lot 27. Lot 27 is located at 1128 Westdale Road, Oakville, Ontario and is registered under PIN 24775-0095LT, Lot 27, PLAN 20M651, S/T H661043, OAKVILLE. The APS required that the Plaintiff remove, at its own expense, the existing buildings and materials on Lot 27 within 90 days of acceptance of the APS. The property sold for $2,800,000.

[8] There appears to have been some negotiation over whether or not the purchase price included HST. The original draft of the APS stated that HST was “included in” the purchase price. However, a hand written change was made to clause 7 of the APS which relates to HST, crossing out “included” and replacing it with “addition to”. The next line of clause 7 reads: “If the sale of the property is not subject to HST, Seller agrees to certify on or before closing, that the sale of the property is not subject to HST.”

[9] Prior to the APS being executed there was an exchange between the Defendant’s real estate agent, Jim Brennan and Victor Brewda, the Plaintiff Corporation’s Director regarding HST. Mr. Brennan sent an email to Mr. Brewda on March 16, 2015 which asked: “Is HST in addition or included?” Mr. Brewda sent Mr. Brennan an email in response on the same day which reads as follows:

“The HST depends on the buyer taking title, probably a better question for the professionals. Most time it is a wash as if it is paid and he has no expense, it would be returned, so normally a form is signed and avoided. Most accountants, have the better answer.”

[10] The APS was conditional on the approval of the terms by the Buyer’s Solicitor by no later than 5 p.m. on April 6, 2015. If not waived by the Buyer/Defendant, the APS would become null and void.

[11] The Defendant’s husband, Mr. Jeff Parks, consulted the Defendant’s lawyer regarding the HST issue in early April. On April 6, 2015, Mr. Brian Hanna, the Defendant’s real estate lawyer, explained to Mr. Park that clause 7 of the APS left open the possibility of HST being required in addition to the purchase price. Mr. Parks confirmed to Mr. Hanna that he could arrange payment of the HST if necessary. This is evidenced by the telephone record of the call created by Mr. Hanna, which stated, “HST ‘in addition to’-$364,000 – Client knows and is prep’d to pay”.

[12] On the same day, April 6, 2015, the Defendant waived the condition of the APS that required the approval of the terms by the Buyer’s Solicitor.

[13] On April 9, 2015, there was discussion concerning whether or not HST would be payable on the transaction. On this date, Mr. Hanna spoke with Mr. Brewda, and asked him whether or not HST would apply to this sale. Mr. Hanna’s recollection is that Mr. Brewda told him HST was “all in” the purchase price and that there was to be no HST in addition to the purchase price. Mr. Brewda disputes this version of the conversation and does not believe he told Mr. Hanna the purchase price included HST. The Defendant argues that Mr. Brewda is a sophisticated seller and a real estate agent, builder, mortgage broker and paralegal with decades of experience in the real estate business.

[14] Mr. Hanna’s Affidavit describes the exchange as follows. On April 9, 2015, he left a message for Mr. Brewda, noting the call in a contemporaneously-created telephone record. He then spoke with Mr. Brewda that same day, and says that he assured him it would not be necessary for the Defendant to pay HST in relation to the purchase as there was no HST payable by the buyer. Mr. Hanna says that Mr. Brewda stated the $2,800,000 purchase price was “all-in” and that there was to be no HST in addition to that price. Mr. Hanna created a hand-written telephone record for the conversation, writing: “Will not be charging or expecting HST on closing”. Mr. Hanna states that had he not received these assurances from Mr. Brewda, he would have consulted with an HST expert.

[15] In his Affidavit, Mr. Brewda states that he could recall only one conversation with Mr. Hanna. He says that Mr. Hanna called him without warning and that he felt “put on the spot” to receive a direct phone call from Mr. Hanna when he was represented by a lawyer on the sale. He says that at this time, he advised Mr. Hanna that he did not believe HST was applicable on the sale, but at no time did he provide any assurances in that regard. He says that he did not represent himself to be an expert on the issue during the phone call, nor did Mr. Hanna suggest that his client would be relying on his belief.

[16] On April 14, 2015, Mr. Hanna delivered a requisition letter to the Plaintiff’s lawyer, Mr. Stuart Reddington, requiring on or before closing, evidence that the transaction would not be subject to HST. The letter also included a Statutory Declaration re HST and a request that the Statutory Declaration be executed by the vendor and returned on or before closing. On April 29, 2015, Mr. Reddington responded with a letter outlining 2137691 Ontario Limited’s position on the requisitions. With respect to the request for evidence that the transaction would not be subject to HST, Mr. Reddington responded saying: “Please satisfy yourself”. The April 29 letter indicated that the Statutory Declaration would be provided on closing.

[17] On April 30, 2015, the date of closing, Mr. Brewda signed and provided a Statutory Declaration on the HST issue, which reads in part as follows:

The property is a “used residential complex” and the sale of the property is exempt from HST under Section 2, 3, or 4 of Part 1 of Schedule V of the Excise Tax Act of Canada, and I make this declaration to be delivered with the intent that it be relied upon by the purchaser in claiming such exemption as a statement in writing or certificate delivered to the purchaser pursuant to Section 194 of the Act.

[18] Mr. Brewda testified in his cross-examination that the reason he signed the Statutory Declaration was “To close the deal”.

[19] On the day of closing, April 30, 2015, the Defendant executed an “Undertaking to Readjust”, agreeing to readjust the Statement of Adjustments after closing should it be found to contain any errors or omissions.

[20] At the time of closing, the structures on the property remained intact. They were demolished by the Plaintiff approximately 45 days after closing. In the period since then, the Defendant has built and maintains a residence on Lot 27.

[21] Approximately one year after closing, in or about May 2016, when Mr. Park was in the process of applying for a building permit for the property, he was advised that the Town of Oakville would be charging a development fee in the amount of $58,097.84. Schedule A of the APS was drafted to include the following clause: “The Seller agrees to pay at the Sellers expense all lot levies and development charges for the said property when and as required by the Town of Oakville.” The Defendant contacted the Plaintiff to arrange payment of the development charge pursuant to the APS.

[22] In a letter dated May 16, 2016, Mr. Reddington, the Plaintiff’s lawyer, acknowledged the lot levy was to be paid by the Plaintiff. At this time, he also informed the Defendant that HST was in addition to the purchase price, and was therefore outstanding. The Plaintiff required that the HST be paid by the Defendant and took the position that the development charge would not be paid but rather set off against the HST owed.

[23] The Plaintiff has since filed a tax return with the Canada Revenue Agency (“CRA”) with respect to the HST it believes is owing on the sale; however, it has not remitted the HST to the CRA. The tax return appears to have been prepared in January 2018. It was filed after the action was commenced by the Plaintiff and after the Plaintiff brought the summary judgment motion.

B. Issues

1. Is summary judgment appropriate in the circumstances?
2. Is the Plaintiff’s claim for HST premature?
3. Is HST owing on the sale of the property?
4. If HST is owed, who is liable to pay it?
5. Is the Plaintiff required to pay the development charge?

1. Is summary judgment appropriate in the circumstances?

[24] Both parties are in agreement that summary judgment can appropriately resolve the issues in the original motion and cross motion. The parties submit that the material facts are not in dispute and that the issues involve a narrow legal argument.

[25] The court may grant summary judgment under Rule 20.04(4) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 where it finds there is no genuine issue requiring trial. The Rule permits that the court consider the evidence submitted by the parties, weigh the evidence, evaluate the credibility of witnesses, and draw any reasonable inferences from the evidence to determine if there is a genuine issue for trial in a claim or defence. The court has discretion to exercise these fact-finding powers unless it is the interests of justice for them to be exercised only at trial.

[26] These expanded fact-finding powers on summary judgment motions were set out by the Supreme Court in Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87. In Hryniak, the court stated the following at paragraphs 49-50:

49. There will be no genuine issue requiring a trial when the judge is able to reach a fair and just determination on the merits on a motion for summary judgment. This will be the case when the process (1) allows the judge to make the necessary findings of fact, (2) allows the judge to apply the law to the facts, and (3) is a proportionate, more expeditious and less expensive means to achieve a just result.

50. These principles are interconnected and all speak to whether summary judgment will provide [page107] a fair and just adjudication. When a summary judgment motion allows the judge to find the necessary facts and resolve the dispute, proceeding to trial would generally not be proportionate, timely or cost effective. Similarly, a process that does not give a judge confidence in her conclusions can never be the proportionate way to resolve a dispute. It bears reiterating that the standard for fairness is not whether the procedure is as exhaustive as a trial, but whether it gives the judge confidence that she can find the necessary facts and apply the relevant legal principles so as to resolve the dispute.

[27] I find there are no genuine issues requiring trial in the Plaintiff’s claim for HST, or the Defendant’s cross-claim for development fees. The parties agree that the material facts necessary for me to determine these issues are not contested. Furthermore, the determination of the issues relies primarily on interpretation of the contractual language of the APS and Statutory Declaration, as well as interpretation of the legislative scheme of the Excise Tax Act, R.S.C., 1985, c. E-15 (“ETA”). Therefore, it is appropriate to resolve both the motion and cross-motion by way of the summary judgment procedure.

2. Is the Plaintiff’s claim to recover HST premature?

[28] The Defendant argues that the Plaintiff’s claim for HST is premature. This is because it has not received an assessment from the CRA determining that HST is owing. Further, it has not remitted any HST to the CRA. Therefore, it is seeking to recover without a right of action as there is no existing loss.

[29] The Defendant relies on the case of National Money Mart v. 24 Gold Group Ltd., 2017 ONSC 6373, [2017] G.S.T.C. 81, at para. 11. Diamond J. states as follows:

A review of section 224 of the Excise Tax Act discloses that in situations where a supplier/vendor pays an outstanding tax due and owing from a recipient/purchaser (i.e. the vendor/supplier having not been able to collect the tax from the recipient/purchaser), then and only then does the supplier/vendor acquire the right to commence a legal proceeding to recover the outstanding tax from the recipient/purchaser "as though it were a debt due by the recipient/purchaser". In other words, until such time as the supplier/vendor "steps into the shoes" of the recipient/purchaser, no right to sue exists as such an action would be premature.

[30] The Defendant argues that the Plaintiff had to pay the HST in order to have the right to sue the Defendant. Otherwise, the action is premature.

[31] The Plaintiff argues that in the matter before me, section 224 of the ETA is not applicable. The Plaintiff is not suing under s. 224 of the ETA but under the contractual terms between the parties. The Plaintiff also submits that in the case of Len’s Construction Midland Ltd. v. Georgian Bay Native Friendship Centre Inc., [1998] O.J. No. 599 (C.J. Gen. Div.), the vendor successfully sued the purchaser for GST even though the vendor had not remitted the GST owing to the Minister.

[32] Given my findings below that firstly, HST was not payable on the transaction, and secondly, that the Defendant is not liable to pay HST to the Plaintiff even if HST is payable, I find that there is no issue as to whether the matter is premature due to the Plaintiff not having paid the HST to CRA.

[33] Further, there was discussion about whether the summary judgment motion related to the HST should be argued only after the CRA has determined whether or not HST is payable on the transaction. At this point in time, the Plaintiff has filed a return showing that the HST is payable but the return has not been assessed.

[34] I have determined that it is not necessary to await the CRA assessment. This is for several reasons.

[35] First, given my findings, the assessment is not relevant to the issues between the parties. Second, even if I had found that HST is owing, it is within the court’s jurisdiction to determine the contractual obligations between private citizens. As stated by the Court in Rive v. Newton, [2001] O.J. No. 3226 (S.C.), confirmed on appeal [2003] O.J. No. 398 (C.A.), the court must determine the effect of agreements between parties. Paragraphs 10 and 12 of Rive state as follows:

10 In this case, the Court is not asked to make a determination of tax owed to the CCRA. This case involves an action in contract, in which the plaintiff claims that the defendant is contractually obligated to pay him the sum of $26,168.22. In order for the Court to decide the contractual obligations between the parties it is necessary to determine a question of law that has arisen, namely, whether the sale of land in this case was subject to G.S.T.

12 While the Tax Court of Canada Act effectively removes the jurisdiction of the provincial superior courts to determine matters relating to assessments under the Excise Tax Act, it does not limit the courts' jurisdiction to determine contractual rights and obligations between private citizens. In this case the Court must determine the effect of the agreement between the parties and in order to do so must interpret certain sections of the Excise Tax Act.

[36] As clarified in Rive, I am not making a determination of tax owed to the CRA. In order for me to decide the contractual obligations between the parties, it is necessary to determine, as a question of law, whether the sale of Lot 27 is subject to HST. I am determining the effect of the APS between the parties and in order to do so must interpret certain provisions of the ETA.

[37] Third, counsel for the Defendant provided the material on the motions to counsel for the Department of Justice. Defendant’s counsel advised the Department of Justice’s counsel, in writing, that the motions would be proceeding and that I would be asked to decide the issues on the merits, including the issue of whether any HST is payable on the real estate transaction. The Department of Justice advised the Defendant’s counsel that he had no instructions and would not be attending the March 29, 2018 hearing. To be clear, I am not being asked to make a determination of tax owed to the CRA.

[38] Here, I am being asked to determine contractual issues and obligations between the Plaintiff and Defendant, and in doing so must interpret certain sections of the ETA. This is within the jurisdiction of this court, and in the circumstances of the case before me, does not need to await the determination of the CRA assessment.

3. Is HST owing on the sale of the property?

[39] The parties dispute whether or not HST is owed on the sale of the property in question. The parties appear to agree that the sale of real property is generally a taxable supply including the sale of a vacant lot when the sale is made by an independent company, such as the Plaintiff Corporation. Section 165(1) of the ETA sets out the general rule for when tax is payable. It states:

Imposition of goods and services tax

165 (1) Subject to this Part, every recipient of a taxable supply made in Canada shall pay to Her Majesty in right of Canada tax in respect of the supply calculated at the rate of 5% on the value of the consideration for the supply.

[40] At issue, is whether or not the “used residential HST exemption” applies to the property as set out in the ETA under Schedule V, “Exempt Supplies”. This Schedule details the types of residential complexes that are tax exempt as well as the exceptions to this exempt status.

[41] To determine whether HST is owing on this real estate transaction, I have been asked to interpret s. 123(1) of the ETA in particular. Section 123 provides definitions to interpret the Act. Under this section, “residential unit” is defined as follows:

residential unit means

(a) a detached house, semi-detached house, rowhouse unit, condominium unit, mobile home, floating home or apartment,

(b) a suite or room in a hotel, a motel, an inn, a boarding house or a lodging house or in a residence for students, seniors, individuals with a disability or other individuals, or

(c) any other similar premises,

or that part thereof that

(d) is occupied by an individual as a place of residence or lodging,

(e) is supplied by way of lease, licence or similar arrangement for the occupancy thereof as a place of residence or lodging for individuals,

(f) is vacant, but was last occupied or supplied as a place of residence or lodging for individuals, or

(g) has never been used or occupied for any purpose, but is intended to be used as a place of residence or lodging for individuals; ( habitation )

[42] The material facts are as follows: the property was listed as the sale of vacant land and the APS included a requirement that any existing structures be demolished by the vendor. At the time of closing, the property had on it a pool house and hallway structure connected to a home on other lots. At the time of closing, this structure remained on the property. It was demolished by the vendor some 45 days after closing.

The Plaintiff’s Position

[43] The Plaintiff’s position is that HST is payable on the sale of the property pursuant to section 165(1) of the ETA. It is the Plaintiff’s position that the property was listed and sold as a vacant lot and therefore is not a used “residential unit” qualifying for an exception under Schedule V of the ETA. The Plaintiff submits that the Defendant’s husband, Mr. Park, acknowledged in his cross-examination that the Defendant was buying vacant land and that Mr. Hanna, in his cross-examination acknowledged the same.

[44] The APS required that the pool house be demolished by the Plaintiff within 90 days of the signing of the APS. However, the Plaintiff states it was just happenstance that title was transferred from the Plaintiff to the Defendant prior to the demolition taking place. It is the Plaintiff’s position that the APS was not completed until the demolition occurred.

[45] The Plaintiff relies on section 133 of the ETA, which provides as follows:

133 For the purposes of this Part, where an agreement is entered into to provide property or a service,

(a) the entering into of the agreement shall be deemed to be a supply of the property or service made at the time the agreement is entered into; and

(b) the provision, if any, of property or a service under the agreement shall be deemed to be part of the supply referred to in paragraph (a) and not a separate supply.

[46] It is the Plaintiff’s submission that at the time the agreement was entered into, the parties bargained for the sale of vacant land. Further, the Plaintiff argues the provision in the APS for the demolition of any structures on the property is a service under the APS and does not impact on the nature of the supply agreed upon. Therefore, the APS was for the supply of vacant land that is not exempt from HST.

[47] The Plaintiff also relies on the definition of “commercial activity” in section 123(1) of the ETA in support of its position that the making of a supply of real property includes anything done in the course of or in connection with the supply. The Plaintiff argues that because the definition of commercial activity requires one to look at the nature of the supply in the APS, the relevant time to determine the supply is at the time the APS is executed. “Commercial activity” is defined as follows under the Act:

commercial activity of a person means

(a) a business carried on by the person (other than a business carried on without a reasonable expectation of profit by an individual, a personal trust or a partnership, all of the members of which are individuals), except to the extent to which the business involves the making of exempt supplies by the person,

(b) an adventure or concern of the person in the nature of trade (other than an adventure or concern engaged in without a reasonable expectation of profit by an individual, a personal trust or a partnership, all of the members of which are individuals), except to the extent to which the adventure or concern involves the making of exempt supplies by the person, and

(c) the making of a supply (other than an exempt supply) by the person of real property of the person, including anything done by the person in the course of or in connection with the making of the supply; ( activité commerciale )

[48] The Plaintiff submits that it would be illogical to separate out and draw a distinction between the sale of the property with existing structures and the subsequent agreed upon demolition. The Plaintiff argues that for the purposes of categorizing a supply, what is actually provided to the buyer at the time title is transferred is not relevant. Rather, the nature of a supply is determined by what is being supplied in the APS.

[49] The Plaintiff also relies on the Affidavit of Diana Spagnuolo, a certified public accountant sworn January 9, 2018, as well as her reports dated June 16, 2017 and October 25, 2017. Ms. Spagnuolo was retained as an expert by the Plaintiff. The Plaintiff relies on her opinion that HST was payable on the sale of the land in question and that the sale of a vacant lot does not satisfy the definition of a residential complex. The sale of a vacant lot is exempt if the sale is made by an individual. In this case, the sale was made by a corporation. In her second report, Ms. Spagnuolo was asked her opinion on whether it made any difference that a structure on the property was demolished after the date of the closing, and in her opinion, it did not. In her view, the structure on the lot had to be a “complete residential unit” to be exempt. In her opinion, the structure had to be capable of being used as a place of residence in order to qualify for the exemption.

[50] The Plaintiff relies on the case of Yakabuski v. R., 2008 TCC 27, [2008] G.S.T.C. 10, in support of its argument that the pool house does not qualify for the residential complex or residential unit exemption. It argues that the structure does not qualify because it was not habitable. The court in Yakabuski concluded at paragraph 43 that to qualify for the exemption, the structure had “to be capable of being used as a place of residence and that which was being transferred, had to be a detached house or part thereof that was last occupied or supplied as a place of residence or lodging for individuals.” The property had to be capable of being used as a place of residence.

[51] The Plaintiff submits that the pool house structure was not capable of being used as a place of residence. The Plaintiff agrees that a ‘part of’ a building can qualify as a ‘residential unit’ but submits that the ‘part of’ the building must also be a place of residence or lodging, and that the pool structure was not a place of residence or lodging.

The Defendant’s Position

[52] The Defendant takes the position that the court should disregard or give little weight to Ms. Spagnuolo’s reports for the following reasons:

1. The HST is a statutory creation and its application to a given set of facts is a legal question. The courts routinely decide legal questions without expert evidence, let alone evidence proffered by a non-lawyer.
2. Ms. Spagnuolo does not appear to possess special or particular knowledge that goes beyond that of the trier of fact. The Defendant relies on Mole and Mole v. Manwell, 2017 ONSC 3357, [2017] O.J. No. 2818, at para. 50, and R. v. Thomas, [2006] O.J. No. 153 (S.C) to support this point.
3. Ms. Spagnuolo is offering a legal opinion on a matter of domestic law although she is not a lawyer. The Defendant states this is not permissible and references three cases in support: Charette v. Trinity Capital Corp., 2012 ONSC 2824, [2012] O.J. No. 2328; 4145356 Canada Ltd. v. Canada, [2010] T.C.J. No. 518; and Nature Conservancy of Canada v. Waterton Land Trust Ltd., 2014 ABQB 303, [2014] A.J. No. 539. Further, Ms. Spagnuolo’s opinion purports to address the “ultimate issue”: Walsh v. BDO Dunwoody LLP, 2013 BCSC 1463, [2013] B.C.J. No. 1781.
4. Neither the Plaintiff nor Ms. Spagnuolo provided the instructing email she received from Mr. Sacks on May 3, 2017, nor the update of facts she received from Mr. Sacks by email on October 3, 2017. These are referred to in Ms. Spagnuolo’s reports. The Defendant submits that this is contrary to Rule 53.03 (2.1) 3. of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, and the case of Imperial Oil Limited v. Oakville (Town), 2012 ONSC 6933, [2012] O.J. No. 5880.
5. Ms. Spagnuolo's analysis is deficient. It is the Defendant’s position that Ms. Spagnuolo did not address key language under the ETA and did not know of or ignored critical facts. The Defendant points to the fact that she did not address the Statutory Declaration or reference section 194 of the ETA. The Defendant also points out that in her June 16, 2017 report Ms. Spagnuolo said the house straddled two of the three lots when it in fact straddled all three. In her first letter, she did not address the fact that the demolition did not take place until after the closing. These errors were corrected in her October 25, 2018 report but she still did not deal with the Statutory Declaration or s. 194 of the ETA. Ms. Spagnuolo did not explain why the pool house did not satisfy the “part thereof” language from the definition of “residential unit” in s. 123(1) of the ETA. Ms. Spagnuolo uses the language of “an entire residential unit” and “a complete residential unit” which is not part of the ETA definition of “residential unit”. Rather, the ETA definition of “residential unit” does include a “part of” a detached house.

[53] It is the Defendant’s position that the property was not vacant. Firstly, the Defendant argues that the wording of the listing for the property saying it was vacant is not relevant as it does not form part of the APS. Second, the material time to determine whether or not the property was an exempt supply is the time of the transaction, specifically, the date of closing on April 30, 2015. At this date, the property continued to have a building on it and it is the Defendant’s position that the building was a substantial, insulated, and dry-walled structure, comprising of an indeterminate number of rooms and attached by a stone hallway to the rest of the original house. The Defendant submits it was part of a detached house that is or was occupied as a place of residence.

Analysis

[54] I will deal firstly with the Affidavit of Ms. Spagnuolo and her two reports. In my view, Ms. Spagnuolo has expressed an opinion on domestic law. This is impermissible: see Charette, at paras. 44-45; 4145356 Canada Ltd., at paras. 11-12; and Nature Conservancy of Canada, at para 547. This is not an area in which the court requires the assistance of expert opinion.

[55] Even if I am incorrect and should consider her reports, I would give them little weight. Her instructions were not disclosed by the Plaintiff or in her reports. Further, in her first report she makes a significant error on a material detail, namely, she incorrectly states that the prior existing home on the property straddled only two of the three lots. This taints the accuracy of her first letter.

[56] In her second letter, she uses phrases such as “an entire residential unit” and states the property it is not “a complete residential unit”. This language is not found in the definition of a residential unit or complex in s. 123 (1) of the ETA. Significantly, her reports include no description of the pool house. It is not clear what information she had available to her about the pool house. Further, she does not at all address how the Statutory Declaration or s.194 of the ETA affect the analysis. These issues are dealt with below.

[57] Secondly, I find that the time of the supply is the time that the deal closes. This is logical. It is not logical that the supply is made on the date the APS is executed. HST would not be payable at that time, and further, there would not be a taxable supply if the deal never closed. It was at closing that the transaction was completed not upon the execution of the APS. This finding is consistent with the Court’s decision in Yakabuski, which provides as follows:

[37] Counsel for the Respondent took the position that in order for this to be a residential unit or residential complex; it has to be a place of residence. In the case at bar whatever the taxpayers were going to do with the property after the fact, they did not finish the renovation and did not make it a residential complex. Whatever was transferred was not inhabitable and therefore was not a residential complex. The important point in time was the point of transfer and at that time it had to be capable of being occupied as a residence.

[38] The Court is satisfied that the argument of counsel for the Respondent is well-taken where she argued that what we are talking about at the point of transfer is “that which was transferred”. We are not talking about whatever existed there before. All references in the terms “residential complex” and “residential unit” have to be related to that which was transferred to the Appellant when she completed the transaction as referred to in the Contract of Purchase and Sale. Simply put, that which was transferred was not a “residential complex” or “residential unit”.

[58] Therefore, the transaction was completed on closing. The material time for the determination of whether the property was a “residential complex” and “residential unit” subject to an HST exemption is the time of closing.

[59] Before I consider the evidence as to the whether the pool house qualifies as a “residential unit” per the ETA definition, I will address the issue of onus. In my view, the onus on this question is with the Plaintiff. It is the Plaintiff who is claiming that the HST is payable to the CRA, and therefore to be paid by the Defendant to the Plaintiff. Therefore, it is the Plaintiff who must establish that HST is payable and that the residential complex exemption does not apply. This is buttressed by the fact that Mr. Brewda, principal of the Plaintiff, swore a Statutory Declaration stating that the exemption did apply. It may be that this onus would not fall to the Plaintiff in other circumstances. However, in my view, it is appropriate that the Plaintiff bear the onus in the circumstances of this case.

[60] The evidence related to the pool house structure was provided by Mr. Brewda. I have also viewed pictures of the residence and the pool structure. The pool structure is stone and appears to have several sets of sliding doors. It has a sloping, shingled roof. It is joined to the residence by a covered stone hallway built of the same materials. Part of the hallway and the entire pool structure is on Lot 27. I do not know the size of the pool structure but from the photographs I can see it is not a small structure. From the site plan it appears that the pool structure is approximately a third of the size of the home it was connected to from the perspective of ground coverage. The home is multi storey and the pool house appears to have been one storey.

[61] In the cross-examination of Mr. Brewda on his Affidavit which took place on January 10, 2018, Mr. Brewda agreed the structure on Lot 27 was described as a pool house. He agreed that it was a structure that had an in-ground pool in it. It was built of the same stone as the rest of the house. He agreed it was integrated into the rest of the house. He agreed it was architecturally integrated and was by look and feel similar to the rest of the house. Mr. Brewda said he did not know if the pool house was winterized or insulated or if it was heated or had a hydrotonic system. He did not know how many rooms the pool house had in it. Mr. Brewda had been in the pool house once. Mr. Brewda said the structure was “like, 60 years old.” He said the air was not of very good quality in the pool house. With further questioning, Mr. Brewda acknowledged that it was insulated, had drywall, and was one storey. He did not see water in the pool. Mr. Brewda said it looked as if it had not been used for maybe 10 or 15 years. He was asked not to speculate and he said “fair enough.”

[62] In my view, the hallway joining the residence to the pool house was part of a residential complex. The residence was a detached home and even though it was vacant prior to the sale, it was last occupied or supplied as a place of residence or lodging for individuals. The detached home was clearly a residential unit as defined in s. 123(1) of the ETA. This is uncontroverted.

[63] The definition of residential complex also includes any appurtenances to the building. The pool house was attached to the home by a permanently covered stone hallway. I find that at the time of closing, the residence and pool structure were a complete structure which were suitable for living in. The pool house was part of the greater residential complex. As Mr. Brewda said, the pool house was integrated with the residence. The hallway itself was located partly on Lot 27 and Lot 28; it was attached to the residence at one end and the pool house at the other. It was clearly an appurtenance to the detached home.

[64] Further, I find that even when considered in isolation of the remainder of the residence and looking only at Lot 27, the pool house was a residential unit. It was a permanent stone structure, with its own entrance way (the sliding doors). It had a permanent roof, and was insulated and dry-walled. Per Yakabuski, the Plaintiff has the onus of establishing it was uninhabitable. It has not done so. The definition of a residential unit includes a mobile home, a floating home, a room in a hotel, motel, inn, boarding house or lodging house. It is reasonable to conclude that a permanent, insulated, dry-walled, stone structure is a residential unit. There is no requirement in ETA that the residential complex/residential unit exemption involve the transfer of an entire residential unit or a complete residency unit. This would be contrary to the “part thereof” language in section 123(1) of the ETA.

[65] The Plaintiff argued that the fact that the closing occurred before the demolition took place was mere happenstance. As I have set out above, I consider the closing date to be the transaction date, that is, the date of supply. The Plaintiff argued that the APS was not completed until the demolition occurred. In my view, the Defendant became the owner of the property on closing. As of that date, the Defendant owned the land, which included a portion of the covered hallway and the pool house. The Defendant’s ownership would not be undermined in any way if the demolition did not take place. The Plaintiff had a contractual obligation to complete the demolition. However, irrespective of this obligation, the land, including the hallway and pool house, transferred to the Defendant at the time of closing.

[66] The facts in this case can be distinguished from the facts in Yakabuski. In Yakabuski, the purchasers agreed that the house and cottage on the property were both uninhabitable. That case involved a fire damaged house that was vacant and uninhabitable. Only the remnants of a dwelling remained on the land. Justice Margeson described what was transferred in Yakabuski at paragraph 33 as “partially the destroyed remnants of a former house”. There is no evidence before me that either the residence, including the hallway straddling Lots 27 and 28, was uninhabitable or that the pool house was uninhabitable.

[67] In Leowski v. Canada, [1996] T.C.J. No. 829 (T.C.C.), the issue of whether a property was a residential complex or a residential unit was at issue. The property was vacant and loaded with sand in anticipation of construction. Bowman J.T.C.C. interprets the definition of residential unit or complex on these facts as follows:

21 Despite the ingenuity of the argument and the great skill with which Mr. McMahon presented it, there are a number of parts of it that I cannot accept.

(a) I do not think that the property was a “residential complex” as defined. Paragraphs (a), (b) and (c) refer to a part of a “building”. The plain meaning of “building” does not include a plot of vacant land, even if it has been preloaded with sand in anticipation of constructing a building on it. Nor do I think that property is a residential unit. A vacant parcel of land is none of the things set out in paragraphs (a), (b) or (c) of the definition of residential unit. Nor is the vacant land a “part thereof” (i.e. of the things set out in paragraph (a), (b) and (c)). I would need to construe paragraph (f) to read:

The part of the land that was subjacent to a detached house that was demolished before the purchaser acquired the land and that was occupied as a place of residence for individuals.

I do not think paragraph (f) bears that construction If that was what Parliament meant it would have been quite capable of saying so.

It follows therefore that section 2 of Part 1 of Schedule V does not assist the appellant even if section 177 turned the supply into one by the Bentalls

(b) The sale is clearly a supply of real property for the purposes of section 9 of Part 1 of Schedule V. For that section to apply, however, the sale must be by an individual or a trust and this involves, of course, invoking section 177. An exception to the exemption is found in subparagraph 9(b)(i), where the supply is made “in the course of a business of the individual or trust”. Counsel for the appellant argues that although the supply was in fact by Siena, it was deemed by section 177 to be made by the Bentalls and it was not in the course of any business carried on by them. The difficulty with this argument is that it appears contradictory to the position taken in the attempt to make section 177 applicable, which requires that, among other things, the supply be made “in the course of a commercial activity of the agent”. I shall set out later in these reasons how the appellant seeks to resolve this apparent contradiction.

(c) Section 177 requires that the agent (Mr. and Mrs. Bentall) be a “registrant”. There is no evidence that Mrs. Bentall was a registrant, and very little that Mr. Bentall was. The only evidence that he might have been a registrant is in paragraph 11(k) of the Reply which reads:

Siena claimed ITC’s on the GST charged for the architectural designs by C. Bentall that were Later resupplied as incidental supplies in the Contract

[68] The case supports the conclusion that the relevant time for making the finding is the time the purchaser acquires the land. Further, the property in Leowski had no building on it. It was a vacant parcel at the time it was acquired. The facts of the case before me are distinguishable. Here, at the time of closing, the parcel had on it the pool house and hallway, and the pool house was a permanent stone structure that was insulated and dry-walled.

[69] The Plaintiff argued that both Mr. Hanna and Mr. Park knew the Defendant was buying vacant land. I make two comments in this regard. First, I have read the questions and answers from Mr. Hanna’s cross-examination referenced by the Plaintiff (question 43 and questions 110-113). In my view, Mr. Hanna was clear that on closing the Defendant understood that the part of the building on Lot 27 was to be removed by the Plaintiff and that the Defendant understood that she would eventually be provided with a vacant lot. I have reviewed the questions and answers from Mr. Park’s cross-examination referenced by the Plaintiff (questions 59 to 73). Reading the questions and answers as a whole, I am satisfied that Mr. Park understood at the time of closing that the residential structure on the property was to be removed.

[70] However, the parties’ expectations with regard to the future demolition do not change the facts on the ground at the time of closing. On the date of closing, Ms. Park, Mr. Park, and Mr. Hanna understood there was still a building on the property that was to be demolished at a later date. The Defendant was, as of the date of closing, the owner of the land as well as the structures on it.

[71] I find that the pool house and hallway were “part of” a residential unit per the definition in s. 123(1) of the ETA. The Plaintiff has not proved the structure was uninhabitable. In conclusion, I find that the sale of Lot 27 was the sale of a used residential unit that is an exempt transaction under Schedule V of the ETA.

4. If HST is owed, who is liable to pay it?

[72] As set out above, I have determined that HST is not payable on the sale. In the event that I am incorrect and HST is owed, I will go on to determine who is liable to pay it and whether the Plaintiff can collect the HST from the Defendant.

[73] Before setting out the positions of the parties, I will outline the uncontroverted evidence relevant to this issue, the relevant section of the ETA, and the case law both parties agree is applicable.

[74] There are several clauses in the APS that are relevant to this determination. Sections 7 and 26 of the APS provide as follows:

7. HST: If the sale of the property (Real Property described above) is subject to Harmonized Sales Tax (HST), then such tax shall be in addition to the Purchase Price. If the sale of the property is not subject to HST, Seller agrees to certify on or before closing, that the sale of the property is not subject to HST. Any HST on chattels, if applicable, is not included in the Purchase Price.

8. AGREEMENT IN WRITING: If there is conflict or discrepancy between any provision added to this Agreement (including any Schedule attached hereto) and any provision in the standard pre-set portion hereof, the added provision shall supersede the standard pre-set provision to the extent of such conflict or discrepancy. This Agreement including any Schedule attached hereto, shall constitute the entire Agreement between Buyer and Seller. There is no representation, warranty, collateral agreement or condition, which affects this Agreement other than as expressed herein. For the purposes of this Agreement, Seller means vendor and Buyer means purchaser. This Agreement shall be read with all changes of gender or number required by the context.

[75] The parties agree that section 194 of the ETA is relevant to the determination and section 194 is as follows:

194 For the purposes of this Part, where a supplier makes a taxable supply by way of sale of real property and incorrectly states or certifies in writing to the recipient of the supply that the supply is an exempt supply described in any of sections 2 to 5.3, 8 and 9 of Part I of Schedule V, except where the recipient knows or ought to know that the supply is not an exempt supply,

(a) the tax payable in respect of the supply is deemed to be equal to the amount determined by the formula

(A/B) × C

where

A is

(i) if tax under subsection 165(2) was payable in respect of the supply, the total of the rate set out in subsection 165(1) and the tax rate for the participating province in which the supply was made, and

(ii) in any other case, the rate set out in subsection 165(1),

B is the total of 100% and the percentage determined for A, and

C is the consideration for the supply; and

(b) the supplier shall be deemed to have collected, and the recipient shall be deemed to have paid that tax on the earlier of the day ownership of the property was transferred to the recipient and the day possession of the property was transferred to the recipient under the agreement for the supply.

[76] It is uncontroverted that on April 14, 2015, Mr. Hanna, counsel for the Defendant, wrote a requisition letter to Mr. Reddington, counsel for the Plaintiff. Two of the requisitions are relevant. Requisition 14 and 15 provide as follows:

14. REQUIRED: On or before closing, evidence that this transaction is not subject to Harmonized Sales Tax.

15. REQUIRED: That the following documents which are enclosed herewith, be executed by the vendor and returned to our office, in duplicate, on or before closing:

a) Vendor’s undertakings;

b) Warranties/Bill of Sale;

c) Declaration of Possession;

d) Statutory declaration re HST

[77] It is also uncontroverted that by letter dated April 29, 2015 from Mr. Reddington to Mr. Hanna, Mr. Reddington responded to the requisition letter. In regard to requisitions 14 and 15, the answers were as follows:

14. Please satisfy yourself

15. To be provided on closing

[78] On closing, Mr. Brewda, President of the Plaintiff, provided a Statutory Declaration that provided that it was made in the matter of the Excise Tax Act (Canada) and in the matter of the sale of 1128 Westdale Rd., Oakville, from the Plaintiff to the Defendant. Mr. Brewda, as President, solemnly declared the following in paras. 1 and 6 of the declaration:

1 The above property is occupied as a residential unit, and all parts of the property are reasonably necessary for the use and enjoyment of the property as a place of residence for individuals.

6 The property is a “used residential complex” and the sale of the property is exempt from HST under Section 2, 3, or 4 of Part I of Schedule V of the Excise Tax Act of Canada, and I make this declaration to be delivered to the purchaser with intent that it be relied upon by the purchaser in claiming such exemption as a statement in writing or certificate delivered to the purchaser pursuant to Section 194 of the Act

[79] At the end of the Declaration, Mr. Brewda stated that he made this “solemn declaration conscientiously believing it to be true, and knowing that it is of the same force and effect as if made under Oath.”

[80] Mr. Brewda was asked questions on his cross-examination about the Statutory Declaration. He identified the initials beside paragraph 6 as his own and stated that Mr. Reddington asked him to initial same. He identified that it was his signature on the right hand side of the Declaration. He said he never asked Mr. Reddington why he was signing the Declaration. He was then asked: “You knew why you were signing it?”, and he answered: “To close the deal.”

[81] As set out above, the Defendant signed an “Undertaking to Readjust” dated April 29, 2015. The undertaking was to the Plaintiff, and Reddington & White, Barristers and Solicitors, who were the Plaintiff’s solicitors on the real estate transaction. The undertaking stated the following:

IN CONSIDERATION of and notwithstanding the closing of the above transaction, I hereby undertake to readjust the statement of adjustments after closing should the same be found to contain any errors or omissions, forthwith upon written demand.

[82] Both parties referred to the decision of Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633 regarding contractual interpretation. Paragraphs 59-61 of the decision state as follows (the Plaintiff specifically referred to para 59):

[59] It is necessary to say a word about consideration of the surrounding circumstances and the parol evidence rule. The parol evidence rule precludes admission of evidence outside the words of the written contract that would add to, subtract from, vary, or contradict a contract that has been wholly reduced to writing ( King, at para. 35; and Hall, at p. 53). To this end, the rule precludes, among other things, evidence of the subjective intentions of the parties (Hall, at pp. 64-65; and Eli Lilly & Co. v. Novopharm Ltd., [1998] 2 S.C.R. 129, at paras. 54-59, per Iacobucci J.). The purpose of the parol evidence rule is primarily to achieve finality and certainty in contractual obligations, and secondarily to hamper a party’s ability to use fabricated or unreliable evidence to attack a written contract (United Brotherhood of Carpenters and Joiners of America, Local 579 v. Bradco Construction Ltd., [1993] 2 S.C.R. 316, at pp. 341-42, per Sopinka J.).

[60] The parol evidence rule does not apply to preclude evidence of the surrounding circumstances. Such evidence is consistent with the objectives of finality and certainty because it is used as an interpretive aid for determining the meaning of the written words chosen by the parties, not to change or overrule the meaning of those words. The surrounding circumstances are facts known or facts that reasonably ought to have been known to both parties at or before the date of contracting; therefore, the concern of unreliability does not arise.

[61] Some authorities and commentators suggest that the parol evidence rule is an anachronism, or, at the very least, of limited application in view of the myriad of exceptions to it (see for example Gutierrez v. Tropic International Ltd. (2002), 63 O.R. (3d) 63 (C.A.), at paras. 19-20; and Hall, at pp. 53-64). For the purposes of this appeal, it is sufficient to say that the parol evidence rule does not apply to preclude evidence of surrounding circumstances when interpreting the words of a written contract.

[83] The Defendant referred to paragraph 47 of Sattva, which provides as follows:

[47] Regarding the first development, the interpretation of contracts has evolved towards a practical, common-sense approach not dominated by technical rules of construction. The overriding concern is to determine “the intent of the parties and the scope of their understanding” (Jesuit Fathers of Upper Canada v. Guardian Insurance Co. of Canada, 2006 SCC 21, [2006] 1 S.C.R. 744, at para. 27, per LeBel J.; see also Tercon Contractors Ltd. v. British Columbia (Transportation and Highways), 2010 SCC 4, [2010] 1 S.C.R. 69, at paras. 64-65, per Cromwell J.). To do so, a decision-maker must read the contract as a whole, giving the words used their ordinary and grammatical meaning, consistent with the surrounding circumstances known to the parties at the time of formation of the contract. Consideration of the surrounding circumstances recognizes that ascertaining contractual intention can be difficult when looking at words on their own, because words alone do not have an immutable or absolute meaning:

No contracts are made in a vacuum: there is always a setting in which they have to be placed. . . . In a commercial contract it is certainly right that the court should know the commercial purpose of the contract and this in turn presupposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating. ( Reardon Smith Line, at p.574, per Lord Wilberforce).

Plaintiff’s Position

[84] The Plaintiff’s position is that the APS is a valid agreement that requires the Defendant to pay the Plaintiff the HST. The APS is the governing document. It provides that HST is to be paid in addition to the purchase price. Clause 26 of the APS states that the APS constitutes the entire agreement between the parties. There are no representations and warranties which are binding other than those in the APS. As such, there are no representations or warranties outside the APS with regard to HST.

[85] The Plaintiff asserts that the APS and the Statutory Declaration are two different and distinct matters. The Plaintiff says it provided a Statutory Declaration but that this was not a requirement of closing. The Defendant had waived all conditions. Further, the Plaintiff argues the Statutory Declaration was not intended to and did not rewrite the APS. The Defendant would have been obligated to close the transaction even if the Defendant had not provided the Statutory Declaration. The Plaintiff was not mandated to give the Statutory Declaration. The Plaintiff’s answer to the requisition by the Defendant to advise if HST was payable was for the Defendant to satisfy herself. For all these reasons, the Plaintiff argues the Defendant in these circumstances could not rely on the Statutory Declaration.

[86] The Plaintiff’s position is that the Statutory Declaration is separate from the APS and involves a consideration of what the Plaintiff says is the statutory scheme for the enforcement of HST. The Plaintiff describes HST as a “buyer’s tax”, a tax generally payable by the buyer. The Plaintiff states that s. 194 of the ETA and the Statutory Declaration only address with from whom the CRA can collect the HST and have no bearing on the agreement between the parties as to who between them is responsible for the HST. The Plaintiff claims the Statutory Declaration and s. 194 can be relied on by the Defendant if the CRA attempts to collect the HST from the Defendant directly but does not affect the APS and the Defendants obligation to pay the Plaintiff the HST in addition to the purchase price. In summary, the Statutory Declaration is provided only so that the Defendant can claim an exemption from self-assessing and remitting HST to the CRA. It does not change the APS which requires the Defendant to reimburse/pay the Plaintiff the HST. This is how the Plaintiff claims the Statutory Declaration and s.194 of the ETA work together.

[87] The Plaintiff states that the wording of s.194 and the Statutory Declaration support this interpretation. The Plaintiff specifically refers to the last sentence of paragraph 6 of the Statutory Declaration: “I make this declaration to be delivered to the purchaser with intent that it be relied upon by the purchaser in claiming such exemption as a statement in writing or a certificate delivered to the purchaser pursuant to s. 194 of the Act.” The Plaintiff argues that the Declaration is intended to be used by the purchaser if the CRA pursues the purchase directly for the HST and to permit the Defendant an exemption from self-assessing and remitting HST to the CRA.

[88] The Plaintiff submits that an inference should be drawn against the Defendant as the Defendant’s solicitor on the real estate transaction would not answer questions about what the purpose of the Statutory Declaration was in the cross-examination on his Affidavit. Specifically, it is the Plaintiff’s position that Mr. Hanna would not answer questions about the Statutory Declaration and who the buyer would be claiming an exemption from. The Plaintiff references questions and answers 219 to 235. In this regard, the Plaintiff relies on the case of Briggs v. Rents, 2010 ONSC 4051, [2010] O.J. No. 3074, and in particular paragraph 23 of that decision, which provides as follows:

I recognize that even under old Rule 20.02 I can draw an adverse inference from a failure to answer “proper questions” on a cross-examination and I can do so even if the examining party has not brought a motion to compel the answers: Indcondo Building Corp. v. Steeles-Jane Properties Inc. Here, however, I am unable to conclude on the material before me, particularly given counsel’s grounds for the refusals that all of the unanswered questions were indeed “proper” and that an adverse inference of the magnitude suggested can safely and fairly be drawn.

[89] The Plaintiff relies on the Undertaking to Readjust given by the Defendant. The Plaintiff states that not collecting HST at closing was a mistake, and that pursuant to the Undertaking to Readjust, the Defendant is required to adjust for a mistake. The Plaintiff relied on questions and answers from Mr. Hanna’s cross-examination in support of this argument, specifically questions and answers 236-238.

[90] If the Plaintiff is incorrect in the submission that s. 194 and the Statutory Declaration operate separately from the APS, the Plaintiff takes the position that the Defendant knew or ought to have known that the supply was not an exempt supply, meaning the Defendant knew or ought to have known that HST was payable.

[91] The Plaintiff relied on several cases where even though the vendor provided a Statutory Declaration, the purchaser was obligated to pay the tax. In Yoshizawa v. Beaton, 2014 BCSC 360, [2014] B.C.J. No. 389, the Court was considering the payment of GST. An addendum to the sale agreement provided that the purchaser would pay the GST. The seller had signed a GST certificate indicating that the property was GST exempt. The certificate indicated that the sale was exempt because it was the sale of used residential housing. The court considered s. 194 of the ETA and the Statutory Declaration. The court found that the tax certificate did not estop the vendor from claiming the GST from the purchaser.

[92] The Plaintiff argues that the facts in Yoshizawa were very similar to the facts in this case. In Yoshizawa, the purchaser relied on the GST tax certificate sworn by the vendor two days before the closing. Justice Crawford found that the tax certificate did not act as an estoppel and the Plaintiff submits this finding was based on four primary reasons: the APS required the payment of GST; the APS was conditional upon the purchaser obtaining legal advice; there were no misrepresentations by the vendor with respect to the nature of the property sold; and there was no evidence that the purchaser actually relied on the GST certificate. The Plaintiff submits that the facts in the case before me are similar and in particular alleges the following:

a) The Agreement of Purchase and Sale requires the payment of HST, if applicable. At the time the agreement was executed, the Defendant was aware that HST might apply to the sale; b) Mr. Park told Mr. Hanna that the Defendant was prepared to pay the HST, if applicable on the sale, which means that the sale would have been completed even if HST was charged on closing; c) Mr. Park states in his Affidavit that he had the funds necessary to pay the HST on closing, and he would have paid the HST if the terms of the purchase required him to do so. This means that Mr. Park never changed his material position; d) Prior to any discussion with Mr. Brewda about the HST issue, and prior to receiving the Statutory Declaration sworn by Mr. Brewda, the Defendant waived the condition that required the approval of the terms by the Buyer’s Solicitor; e) The Defendant was represented by their own real estate agent and real estate lawyer, and they had an opportunity to perform their own due diligence and/or investigation into whether HST applied to the sale; f) The Listing for Lot 27 and the Agreement of Purchase and Sale clearly indicate that the property was being sold as a vacant lot, and vacant lots are always subject to HST. There is no evidence that the Plaintiff misrepresented the nature of the property; g) The Defendant was required to close the sale regardless of whether the Statutory Declaration was provided by the Plaintiff (all conditions were waived). There was no consideration exchanged for the Statutory Declaration, and it is therefore not binding on the parties; h) The Statutory Declaration was only provided on the day of closing, and there is no evidence that the Defendant would have refused to close absent the delivery of the Statutory Declaration; i) The Defendant has made a bald statement that it relied upon the Statutory Declaration, but the evidence shows that there was no actual reliance that changed her material position or caused prejudice; and j) The Defendant did not rely upon anything Mr. Brewda allegedly said to Mr. Hanna in their call on April 6, 2015, in a manner that changed her material position or caused prejudice, for the same reasons as set out above.

[93] The Plaintiff also relies on Abrams v. Wentworth Condominium Corp. No. 93, [1997] O.J. No. 2417 (D.C.), at para. 22, to assert that the party seeking to defeat the legal rights of the other must show that it changed its material position to its detriment based on the representations of the Plaintiff. The Plaintiff also refers to paragraph 14 of Abrams in support of the Plaintiff’s argument that application of estoppel is restricted to situations where the recipient can show actual prejudice to the recipient resulting from reliance on the other party’s representation.

[94] In Len’s Construction Midland Ltd., the purchaser was ordered to pay the GST in circumstances where the vendor had signed a declaration that the Corporation did not build the residence on the property. Both parties believed that the sale of the property was not a taxable supply. The purchaser failed to request from the vendor a certificate of exemption of GST and the vendor did not provide one. The purchase agreement provided for GST in addition to the purchase price. The vendor gave a declaration (not a certificate) under oath in which the vendor said the transaction was not subject to GST. Judgment was granted in favor of the vendor.

[95] The Plaintiff also referred to a case in the Defendant’s case book, Manoussi v. Davis, 2006 QCCS 1631, [2006] Q.J. No. 2764. In this case, the vendor’s declaration, in the deed of sale, to the effect that the property was used primarily as a place of residence, made it clear that no sales tax would be applicable. Contrary to the vendor’s declaration, the property had not been used mainly for residential purposes. The vendor was registered for GST and TPS purposes and had claimed credits or refunds in the past. The vendor and purchaser had never discussed taxes. The final offer of purchase provided that the purchaser would pay any GST and TPS payable. The circumstances which gave rise to the application of GST and TPS were personal to the vendor and not known to the purchaser. There was no evidence that the purchaser was aware or ought to have known that the sale was taxable. The Plaintiff specifically referred to paragraphs 41, 43 and 44 of Manoussi which provide as follows:

[41] Plaintiff knowingly stated in the contract that the property was used mainly for residential purposes before the sale. Section 194 of the Excise Tax Act provides the following:

194 For the purposes of this Part, where a supplier makes a taxable supply by way of sale of real property and incorrectly states or certifies in writing to the recipient of the supply that the supply is an exempt supply described in any of sections 2 to 5.3, 8 and 9 of Part I of Schedule V, except where the recipient knows or ought to know that the supply is not an exempt supply,

(a) the tax payable in respect of the supply is deemed to be equal to the amount determined by the formula

(A/B) × C

where

A is

(i) if tax under subsection 165(2) was payable in respect of the supply, the total of the rate set out in subsection 165(1) and the tax rate for the participating province in which the supply was made, and

(ii) in any other case, the rate set out in subsection 165(1),

B is the total of 100% and the percentage determined for A, and

C is the consideration for the supply; and

(b) the supplier shall be deemed to have collected, and the recipient shall be property was transferred to the recipient and the day possession of the property was transferred to the recipient under the agreement for the supply. There is no evidence that the purchaser was aware or ought to have known that the sale was taxable. Hence, under subsection b), above Plaintiff is deemed to have received the taxes payable and he is bound to pay such taxes.

[43] In the circumstances the Court must conclude that Plaintiff’s cannot claim from Defendants the payment of sale taxes by reason of his own false representation at the time of the sale. This is tantamount to a “fin de non-recevoir” with respect to Plaintiff’s claim against defendants Davids and Walkstrom. As was said by judge Owen in Sinyor Spinners Ltd. c. Leesona Corporation.

“Without complicating the matter by a discussion and comparison of the common law doctrine of estoppel and the civil law doctrine of “fin de non recevoir”, it can be stated that there is a general underlying principle of our civil law that when a party by his words or conduct holds out and causes another to believe in and act upon the existence of a certain state of facts then that party will not later be allowed to affirm that such a state of facts did not exist.”

[44] It should be underlined that Plaintiff, a well educated person and a long time professor at the MBA level, understood the declaration which he made in the sale contract and its consequences with respect to sale taxes liability. The statement pertaining to the previous use of the property as primarily residential was false to the knowledge of Plaintiff.

[96] The Plaintiff says that the case before me is distinguishable from Manoussi in that the Plaintiff did not knowingly make any false representations in the APS or listing and, in addition, did not knowingly make any false representations about facts that only the Plaintiff would know. The Defendant in the case before me was not induced into the contract based on any misrepresented facts. At paragraph 39 of the Yoshizawa case, Justice Crawford distinguished the facts in Manoussi from the facts in Yoshizawa on this basis. The Plaintiff submits that the Defendant in the case before me knew all the relevant facts and there was no reason why the Defendant and her solicitor could not have found out for themselves if HST was applicable.

[97] The Plaintiff states that not only did the Defendant have all the necessary facts such that the Defendant knew or ought to have known that HST was payable but that the Defendant and her solicitor were also willfully blind to whether HST was payable. The Plaintiff relies on several excerpts from the cross-examination of Mr. Hanna in this regard, including question and answer 49, question and answers 55 to 56 and questions and answers 187 to 194.

[98] It is the Plaintiff’s position that Mr. Hanna’s reliance on the Statutory Declaration was unfounded. He did not go beyond the Statutory Declaration to verify the truth of it. It was Mr. Hanna’s position that since the vendor had confirmed to him that there was no HST payable, he was not required to do anything further. He was of the view that the second sentence in Clause 7 of the APS transfers the weight to the vendor to tell him, the purchaser’s solicitor, whether or not there is HST payable. The Plaintiff alleges this is willful blindness.

[99] In terms of the communications between Mr. Brewda and Mr. Hanna, it is the Plaintiff’s position that Mr. Brewda’s belief regarding whether HST was applicable on the sale is entirely irrelevant given the clear wording of the APS and given that the parties agreed that there were no representations affecting the APS other than those expressed in the APS. The Plaintiff further submits that Mr. Hanna’s recollection that Mr. Brewda suggested the purchase price was “all in” is inadmissible evidence as it directly contradicts the wording of the APS and violates the parol evidence rule: see Sattva Capital Corp, at para 59.

[100] Further, the Plaintiff argues that other aspects of the evidence indicate an understanding on the part of the Defendant that HST might apply and the Defendant might have to pay it. The Plaintiff specifically relies on a notation of Mr. Hanna which indicates that Mr. Park told him the sale would be completed even if HST was payable and that the Defendant would pay it, if required.

Defendant’s Position

[101] The Defendant relies on Sattva in asking the court to look at all of the surrounding circumstances. The Defendant contends that the context is that the APS is a standard form contract that is used in a regulated industry. Further, the real estate transaction took place in the context of a statutory framework that deems certain outcomes. In particular, the statutory context includes powerful deeming language that is triggered if the Statutory Declaration is incorrect. If, as the Plaintiff contends, HST applies to the purchase, then s. 194 would apply. The Defendant contends that there can be no claim by the Plaintiff for that which Parliament has deemed the Plaintiff to have already collected. The Defendant relies on Polygon Southhampton Development Ltd., v. R., 2003 CAF 193, at paras. 13, 53 and 57.

[102] It is the Defendant’s position that the Statutory Declaration and s. 194 of the ETA are not separate from the APS. Clause 7 of the APS links the Declaration to the APS. The Declaration provided by Mr. Brewda was in accordance with Clause 7. Clause 7 contemplates that a Statutory Declaration may be provided by the seller. It is the Defendant’s submission that the Plaintiff is seeking to read the first sentence of Clause 7 of the APS not only in isolation of the rest of Clause 7 but also in isolation of the statutory regime that established the factual matrix of and legal parameters for the APS.

[103] Further, the Defendant’s position is that the requisition for the Declaration flows from the APS and was provided in accordance with the APS. As such, the Defendant was entitled to rely on it. The Defendant argues that the Statutory Declaration was provided by Mr. Brewda in order to close the transaction.

[104] The Defendant claims that s. 194 of the ETA does not deal only with who the CRA can look to. Section 194 protects the buyer from a demand for HST from the seller if the seller has given a Statutory Declaration. The Defendant’s position is that with the provision of a written declaration that the property was not subject to HST, the Plaintiff triggered the deeming provisions in s. 194. The Plaintiff is therefore deemed to have collected the HST, the recipient is deemed to have paid HST, and that if HST is payable, it is payable by the Plaintiff.

[105] The Defendant claims that s. 194 specifically provides that if a vendor “incorrectly states or certifies in writing” to the purchaser that the transaction is “exempt” from HST then the vendor “shall be deemed to have collected, and the recipient shall be deemed to have paid” any applicable HST. The Defendant contends that the Statutory Declaration does exactly that, explicitly stating that the sale in question “is exempt from HST”, and adding, “I make this declaration to be delivered to the purchaser with the intent that it be relied upon by the purchaser in claiming such exemption as a statement in writing or certificate delivered to the purchaser pursuant to Section 194 of the Act”. The Defendant submits that the intention of s. 194 is to protect the purchaser if the vendor makes a mistake in providing the Statutory Declaration that the property is exempt with only one limited caveat, which will be discussed below.

[106] The Defendant’s position is that she relied on the declaration. The exchanges with regard to HST in April of 2015 and the requisition of the Statutory Declaration demonstrate that the Defendant was concerned about the issue. Mr. Hanna told the Parks that they could rely on the formal assurance from the vendor in the Declaration as in his experience as a real estate lawyer, there is no need to probe into the HST issue further once a sworn Declaration is provided.

[107] On considering s. 194 of the ETA, it is the Defendant’s position that she did not know nor could she have known that HST applied to the transaction. Mr. Hanna in his Affidavit states that he explained to the Defendant prior to closing that whether HST applied to this transaction was a complex question given the factors in this particular case. The Defendant also argues that she made efforts to find out whether “HST” applied and relied upon the representations of a more sophisticated seller given Mr. Brewda’s years of experience in the real estate business as an agent, builder, mortgage broker and paralegal.

[108] Mr. Brewda handled the negotiations of the sale to the Defendant on the Plaintiff’s behalf and was also the listing agent for the property. Mr. Brewda owns and manages the Oakville branch of a real estate company and has 35 years of experience in real estate. Mr. Brewda is the C.E.O of a capital company offering construction financing, mortgage financing and mortgage investment.

[109] In terms of whether the Defendant knew or ought to have known, the Plaintiff asserts that her family had lived in the United States since 2006. They had only owned two properties in Ontario; a starter home which was sold when they moved to the United States and a condominium for the Defendant’s parents purchased a few years later. They had never paid sales tax on the purchase of any real property. Prior to the purchase, they were not familiar with the fact that HST can be payable on real estate transactions. The Parks were not familiar with HST generally, as it had been introduced in Ontario while they were living in the United States.

[110] Further, with respect to whether the Defendant knew or ought to have known that the Statutory Declaration was incorrect, the Defendant waived solicitor and client privilege. As set out above Mr. Hanna himself did not know if HST applied in this situation. If the Plaintiff’s position is accepted, then the Defendant argues sellers could sign false Statutory Declarations with impunity, so long as the purchaser was represented by counsel.

[111] The Defendant states that if HST applies to this transaction, then Mr. Brewda misled Mr. Hanna and the Defendant when the Plaintiff provided the Defendant with what the Defendant says amounts to a false Statutory Declaration in order to “close the deal”. The Plaintiff should not be able to benefit from its own misleading statements, contending that the Defendant somehow knew that HST applied even though Mr. Brewda claims he did not know if it did and nor did Mr. Hanna.

[112] The Defendant relied on several cases and also provided responses to the cases relied on by the Plaintiff. I will summarize the Defendant’s position in this regard.

[113] The Defendant referred to paras. 41-44 of Manoussi in support of the Defendant’s submission that the “knows or ought to know” provision in s. 194 of the ETA is a limited caveat to the general rule that even if the seller incorrectly certifies in writing that there is no HST, the Declaration will protect the buyer. The Defendant submits that this limited exception makes sense, as a seller could make a mistake in circumstances where the buyer knew or ought to have known that the seller made a mistake. The Defendant argues that the facts in this case are not that scenario.

[114] The Defendant referred extensively to the decision of the Ontario Court of Appeal in Hanisch v. McKean, 2014 ONCA 698, [2014] O.J. No.4824. In Hanisch, the vendor delivered a statutory declaration that indicated that he was not aware of any persons having a claim or interest in the land transferred. The trial justice found the vendor liable for negligent misrepresentation and awarded damages. The Statutory Declaration was delivered in response to a requisition letter from the purchasers. The Court of Appeal upheld the trial judge’s determination and spoke to the importance of Statutory Declarations. In the transaction in Hanisch, the Statutory Declaration was given in a different context (not in relation to the ETA or HST). Nevertheless, the Defendant submits that the same principles apply to the case before me and specifically refers to paras. 33, 38, and 41 to 49 of Hanisch, which provide as follows:

33 The trial judge’s conclusion that the appellant was liable for negligent misrepresentation rests largely on the following findings:

• on the closing date of the sale of the farm, in response to a requisition letter from the respondent’s solicitor, the appellant delivered to the respondent a statutory declaration in which the appellant made statements indicating, among other things, that he was “not aware of any person or persons ... having any claim or interest in the said lands or any part thereof adverse to or inconsistent with [his] title and that [he was] positive that none such exists.” As the appellant was at all times aware that other users claimed a right to use that waterline, the appellant was “careless and reckless” as to whether his statutory declaration was true. Furthermore:

• the statutory declaration was broadly worded — it was intended to protect not just against actual easements but also against the risk of persons with “any claim or interest” in the farm;

• when the appellant delivered the statutory declaration, he was aware that both he and other users claimed an interest in ongoing use of the water supply from the farm;

• the appellant’s knowledge about the waterline was inconsistent with his statement in the statutory declaration that he was unaware of any persons having any claim inconsistent with his title, and this made the statutory declaration false;

• although the appellant read every clause in the statutory declaration with his long-time lawyer, the appellant did not inform his lawyer about the shared waterline;

• all of the evidence supports not some “misunderstanding” on the part of the appellant, but rather the making of a statutory declaration when he knew it was untrue.

• the statutory declaration was delivered as part of the closing documents for the farm purchase, was intended to be relied upon and was relied upon;

• the respondent’s reliance on the statutory declaration was reasonable — she was unaware of the existence of the waterline and the appellant had delivered the statutory declaration to her with the intention that she rely upon it;

• the respondent’s reliance on the statutory declaration was both intended and reasonable, and this was sufficient, in the circumstances of this transaction, to give rise to a duty of care;

• in the face of his knowledge about his own claim and the claims of other users to ongoing use of the water supply from the farm, the appellant was “careless and reckless” in making the statutory declaration; and

• the respondent’s reliance on the statutory declaration was detrimental to her and resulted in damage.

38 According to the appellant, having bargained for specific terms relating to the water system in the agreement of purchase and sale, it was not open to the respondent to rely on something not provided for by the terms of the contract and seek a remedy in tort.

41 I would not accept these arguments. In Mariani v. Lemstra (2004), 246 D.L.R. (4th) 489 (Ont. C.A.), the plaintiff relied on an allegedly false representation contained in a listing agreement, a pre-contractual document that was not incorporated into the agreement of purchase and sale. Thus, the representation was external to the agreement of purchase and sale — and the very type of representation for which an entire agreement clause is intended to exclude liability.

42 In this case, the false statement was contained in a statutory declaration delivered as part of closing documents and in response to a requisition from the respondent. Such requisitions — and responses to them — were clearly contemplated by the agreement of purchase and sale.

43 In these circumstances, I fail to see how “a separate Hedley Byrne duty of care in tort” in relation to the false statement would be excluded by the entire agreement clause contained in the agreement of purchase and sale. The false statement was contained in a solemn declaration executed under oath and was delivered as part of a process contemplated by the agreement of purchase and sale.

44 Further, as found by the trial judge, the appellant’s duty of care arose specifically from the respondent’s foreseeable and reasonable reliance on the appellant’s representations contained in the statutory declaration. Since the appellant’s duty of care was not precluded by any specific term of the contract, Central Trust does not exclude concurrent liability in tort.

45 Concerning the appellant’s arguments about contractual terms and the fact that his contractual obligation was to deliver good title, I note that, as found by the trial judge, the statutory declaration was broadly worded. As the trial judge said, the statutory declaration was intended to protect the respondent against not only existing interests inconsistent with her title to the farm but also against the risk that there were persons with a “claim” against her title.

46 The appellant was just such a person — and he knew it. He knew he relied on the shared waterline originating at the farm and he knew he was claiming the right to continue to use it. In the face of this knowledge, he knew or ought to have known that his claimed right to use water from the farm property was a “claim ... in the said lands or any part thereof ... inconsistent with [his] title.”

47 The appellant therefore knew, or, at the very least, ought to have known, that his representation to the contrary, in a statutory declaration executed under oath, was false. In swearing the statutory declaration in the face of the knowledge, and in failing to consult with his long-time lawyer about the shared waterline, the appellant failed to exercise the reasonable care that the circumstances demanded. The trial judge was entitled to so find.

48 I am also skeptical of the correctness of the appellant’s submission that the respondent would have had no remedy in contract had the appellant disclosed the existence of the ultimately unsuccessful claims to a shared water supply in his statutory declaration.

49 In any event, that is not this case. The appellant acted negligently in delivering a false statutory declaration on closing. Moreover, he delivered the false statutory declaration in response to a requisition from the respondent — a requisition that was contemplated by the agreement of purchase and sale. Even if the appellant was entitled, under the terms of the agreement of purchase and sale, to delete the statement in the statutory declaration on which the appellant now relies, that is not what he did. Rather, he executed a solemn declaration under oath when he knew or ought to have known it was false and delivered it to the purchaser intending that it be relied upon. In these circumstances, I fail to understand the basis for the appellant’s claim that he cannot be held liable in tort.

[115] The Defendant submits that applying the principles from Hanisch, Mr. Brewda cannot come before the court on behalf of his company, after 35 years in the residential business, having seen, reviewed and signed Statutory Declarations on many occasions, and submit that he was wrong and the Defendant knew or ought to have known this at the same time of closing, while simultaneously asserting that he need not have known that he was wrong. The Defendant alleges that Mr. Brewda was a highly sophisticated corporate real estate vendor, who was represented on the transaction by his real estate lawyer of 25 years.

[116] The Defendant submits that the Yoshizawa case is distinguishable from the facts of this case. In Yoshizawa, the vendor and purchaser both knew of the business activity being carried out on the property. Further, the purchasers did not rely on the tax certificate. The vendor also did not mislead the purchaser. In this case, the court appears to be applying the knew or ought to have known exemption in s. 194: see Yoshizawa, at para. 40.

[117] The Defendant states that the Len’s Construction Midland Ltd. case should be distinguished because the Court in that case did not consider s. 194.

Analysis

[118] In my view, the Sattva case permits me to look at the surrounding circumstances. I agree with the Defendant’s contention that the context must be considered; the APS is a standard form contract used in a regulated industry and as it relates to HST, real estate transactions take place in the context of a statutory framework that includes deeming language that is triggered if the Statutory Declaration is incorrect.

[119] Clause 7 of the APS does not say whether HST applies. Indeed the first sentence of Clause 7 starts with the words “If”. If the sale is subject to HST, then HST shall be in addition to the purchase price. The second clause starts with the word “If” also. If the sale is not subject to HST, the seller agrees to certify this on or before closing.

[120] In my view, the APS is not separate from the requisition, Statutory Declaration, and s. 194 of the ETA. They are all part of the same transaction and are linked. The Statutory Declaration was requested as a requisition under the APS. Clause 7 states that if HST is not payable, the vendor agrees to certify this. The Statutory Declaration refers to the ETA and s. 194 specifically. It states that the sale of the property is exempt from HST, linking it to the APS. The Statutory Declaration also states it is delivered pursuant to s. 194 of the ETA. Therefore, the APS and Statutory Declaration are not two different and distinct matters as the Plaintiff alleges.

[121] In my view, the clear wording of s. 194 of the ETA is to protect the purchaser. If the vendor makes a mistake in the Statutory Declaration, the buyer is entitled to rely on it based on the deeming provisions. The HST is deemed to have been collected by the vendor and paid. Nowhere in s. 194 does it provide that this section only protects the buyer against the CRA. My interpretation of section 194 is consistent with the analysis in Manoussi. The section cannot be read in the manner suggested by the Plaintiff. It protects the buyer against a seller who makes a mistake, subject to one caveat to be discussed below.

[122] I do not find that the wording of the Statutory Declaration and the specific reference to it being relied on in claiming an exemption means it only protects the purchaser from the CRA collecting from the purchaser. The first phrase in Clause 6 states “the sale of the property is exempt from HST.” This is of general application. Clause 1 of the Statutory Declaration, which provides that the property is occupied as a residential unit, is also general in nature.

[123] Reading the relevant parts of Mr. Hanna’s cross-examination as a whole, I do not find that Mr. Hanna refused to answer questions about what the Statutory Declaration referenced when it referred to it being relied upon by the purchaser in claiming an exemption. I find that he answered the questions. Further, it is for me to decide the effect of the Statutory Declaration.

[124] I am not considering in making this determination any evidence of any discussions about HST that took place before closing. I am only considering the APS, the Statutory Declaration provided pursuant to Clause 7 of the APS, and s. 194 of the ETA.

[125] The Statutory Declaration was intended to be relied on. It was provided on closing in an answer to a requisition. The Plaintiff states the Defendant would have closed even if it had not been provided and would not have been entitled to back out of the APS if it hadn’t been provided. This is speculation. It was requisitioned. It was provided. On April 29, 2015, Mr. Reddington indicated it was going to be provided on closing. I do not have to decide whether the Defendant would have had to close the transaction if the signed Statutory Declaration had not been provided because it was provided.

[126] This interpretation is consistent with the Ontario Court of Appeal’s decision in Hanisch. In that case and here, the Statutory Declaration was intended to protect the purchaser. Likewise, the Statutory Declaration was delivered to the purchaser intending that it be relied on. I question why else the Plaintiff would have signed the Statutory Declaration and provided it on closing.

[127] If the Plaintiff’s position was that it was not required to do so, why did it do so? The Plaintiff could have said in answer to the requisition letter that a statutory declaration will not be provided. In my view, the Plaintiff’s position is either that Mr. Brewda did not know and ought not to have known that HST was payable when he signed the Statutory Declaration or that Mr. Brewda knew it was payable and signed it anyway and it only protects the purchaser from collection by the CRA. Both possibilities are problematic for the Plaintiff. If Mr. Brewda knew or ought to have known the Statutory Declaration was false then Mr. Brewda is in the same position as the vendor in Hanisch. If Mr. Brewda’s position is that he did not know and ought not to have known that HST was payable then it is not possible to find that the Defendant knew or ought to have known. I will address this further below.

[128] The Affidavit of Mr. Park, sworn January 5, 2018, at paras. 19 and 20 states that the Defendant relied on the Statutory Declaration. They could have paid the HST if the law required them to. It is clear that both the Parks and Mr. Hanna relied on the Statutory Declaration.

[129] For several reasons, I do not find that Mr. Hanna’s reliance on the Statutory Declaration was willful blindness or that the Defendant knew or ought to have known that HST was payable, and therefore, that the exemption in s. 194 of the ETA does not apply.

[130] First, Mr. Hanna and the Defendant were entitled to rely on the Statutory Declaration. It was provided in accordance with the APS. It was not a separate representation or warranty outside of the APS. It was provided in accordance with the APS.

[131] Second, neither Mr. Hanna nor the purchaser shielded themselves from the HST issue. It is at this stage and this stage only that I have considered events outside of the APS and the Statutory Declaration. The Defendant’s agent asked Mr. Brewda about HST even before the APS was executed. Mr. Hanna spoke to Mr. Park and Mr. Brewda about the HST issue. I am not suggesting that there were representations outside of the APS and Statutory Declaration nor am I relying on any outside representations. I am simply saying neither the Defendant nor Mr. Hanna shielded themselves from the issue. Mr. Hanna was alert to the issue. He prepared a Statutory Declaration. He requisitioned it be executed on closing. It was provided.

[132] Third, if Mr. Brewda’s position is that he did not know whether the HST was payable then it is unreasonable to find that the Defendant knew or ought to have known it was payable given the complicated facts of this case.

[133] Fourth, the onus of proving that the Defendant knew or ought to have known that the Plaintiff was mistaken or that the Defendant was wilfully blind falls on the Plaintiff. The Plaintiff has not met this onus. The Plaintiff says he did not know he was mistaken until many months after the transaction closed. I do not accept that the Defendant ought to have known.

[134] I do not find that the Defendants waiver of conditions has any bearing on this issue. The waiver was as to the terms of the APS. Clause 7 did not resolve whether HST was payable or not. Waiver of conditions did not affect Clause 7 in any way.

[135] I do not find that the Undertaking to Readjust is relevant, even considering Mr. Hanna’s answer at his cross-examination about what it meant. I was provided with no evidence as to whether HST, if payable, would have been part of the Statement of Adjustments. Further, there is no indication that this Undertaking was at all related to the HST issue. Having provided the Statutory Declaration that the transaction was exempt from HST, the Plaintiff cannot claim that the absence of HST on the Statement of Adjustments was an error or omission.

[136] In my view, the Yoshizawa case is distinguishable. First, the vendor in the case before me did represent the prior use of the property in the Statutory Declaration. Second, I have found that the Defendant relied on the Statutory Declaration. In Yoshizawa both the vendor and purchaser knew of the business activity being carried out on the property. In my view, Len’s Construction Midland Ltd. is not helpful as it does not consider s. 194 of the ETA.

[137] In conclusion, if HST is payable, it is payable by the Plaintiff. The Plaintiff has no claim against the Defendant for the HST.

5. Is the Plaintiff required to pay the developmental charge?

[138] The Defendant is seeking to recoup the development charge from the Plaintiff. After learning of the development charge, Mr. Hanna contacted the Plaintiff to obtain payment of the $58,097.84 fee charged by the Town of Oakville, which the seller was responsible to pay under the APS. Mr. Reddington, the Plaintiff’s lawyer, acknowledged in letter dated May 16, 2016 that the Agreement requires the lot levies be paid by the seller, including the developmental charge in question.

[139] The Plaintiff has offered no substantive defence to the cross-motion for the development charge. The responsibility for the development fees charged by the Town of Oakville was conceded by the Plaintiff. These fees are owing to the Defendant.

C. Conclusion and Costs

[140] The Plaintiff’s claim against the Defendant for the payment of HST is dismissed.

[141] The Defendant’s claim against the Plaintiff for the development fees is granted.

[142] If the parties are unable to agree with respect to costs, the Defendant may serve and file brief written submissions as to costs (not exceeding three pages) with a bill of costs attached, to be served and filed within 20 days of today. The Plaintiff may serve and file brief written responding submissions as to costs (not exceeding three pages), to be served and filed within 40 days of today. The Defendant may serve and file brief written reply submissions as to costs (not exceeding one page), to be served and filed within 50 days of today.

Coats J.

Released: July 5, 2018

COURT FILE NO.: 2774/16 & 3483/16 DATE: 2018 07 05 ONTARIO SUPERIOR COURT OF JUSTICE BETWEEN: 2137691 ONTARIO LIMITED Plaintiff – and – LUCIA PESSOA PARK Defendant AND BETWEEN: LUCIA PESSOA PARK Plaintiff - and – 2137691 ONTARIO LIMITED Defendant REASONS FOR JUDGMENT Coats J. Released: July 5, 2018