A-1006-87
Extendicare Health Services Inc. (Appellant)
v.
Minister of National Health and Welfare
(Respondent)
INDEXED AS: EXTENDICARE HEALTH SERVICES INC. V.
CANADA (MINISTER OF NATIONAL HEALTH AND WELFARE)
(CA.)
Court of Appeal, Heald, Mahoney and Mac-
Guigan JJ.A.—Toronto, June 19; Ottawa, June
27, 1989.
Customs and excise — Excise Tax Act — Appeal from trial
judgment nursing homes not "certified institutions" because
privately operated for profit — "Bona fide public institution"
in Excise Tax Act, s. 68.24 conveying intent care provided to
be truly offered to public, not just to select segment —
Improper to infer exclusion where intention of making profit.
This was an appeal from the dismissal of an application for
mandamus requiring the respondent to certify the appellant's
nursing homes under section 68.24 of the Excise Tax Act. The
Trial Judge concluded that the nursing homes were not "bona
fide public institutions" according to the definition in that
section because bona fide was intended to emphasize that tax
exemptions should be reserved for organizations which are
publicly owned or funded. The issue was whether certification
is limited to non-profit-making organizations.
Held (MacGuigan J.A. dissenting), the appeal should be
allowed.
Per Mahoney J.A. (Heald J.A. concurring): "Bona fide
public" is intended to convey the intent that the care provided
by an institution must be truly offered to the public and not just
to a select segment. Struthers v. Town of Sudbury should be
applied. In that case, a hospital, privately owned and operated
for profit, was found to be a public hospital because accommo
dation was provided for all, and it was subject to government
supervision. Nothing in the legislation restricted the exemption
to hospitals supported wholly or in part by charity. Nursing
home accommodation is provided for all who are able to take
advantage of it. The homes are subject to supervision and
control by provincial governments and public funds are con
tributed by both federal and provincial governments. Had it
been intended that the refund be available only to nursing
homes run by governments or as charities, Parliament could
easily have said so. There is no basis for reading into the
provisions an exclusion with regard to institutions operated with
the intention of making a profit.
Per MacGuigan J.A. (dissenting): Struthers v. Town of
Sudbury should be distinguished. There, the hospital was
specifically recognized in a list of hospitals in a schedule to the
The Charity Aid Act. There is nothing comparable in the
Excise Tax Act. Furthermore, Struthers declares the meaning
of "public hospital", not "public institution".
Nothing in the Excise Tax Act offers any guidance as to the
ordinary meaning of "public institution". The concept of insti
tution, when reinforced with the adjective "public", does not
include the notion of private profit. This exclusion of profit-
making is consistent with the dictionary definition of "public
institution". If bona fide adds anything to "public institution",
it can only be to strengthen its non-profit-making character.
STATUTES AND REGULATIONS JUDICIALLY
CONSIDERED
Excise Tax Act, R.S.C., 1985, c. E-15, ss. 68.14 (as am.
by R.S.C., 1985 (2d Supp.), c. 7, s. 34), 68.16 (as am.
idem), 68.24 (as am. idem), 68.26 (as am. idem), 68.27
(as am. idem), 68.28 (as am. idem).
Federal Court Act, R.S.C., 1985, c. F-7, s. 52(b)(î).
CASES JUDICIALLY CONSIDERED
APPLIED:
Struthers v. Town of Sudbury (1900), 27 O.A.R. 217
(C.A.).
REVERSED:
Extendicare Health Services Inc. v. Canada (Minister of
National Health and Welfare), [1987] 3 F.C. 622; 87
DTC 5404 (T.D.).
CONSIDERED:
Re Attorney-General of Ontario and Tufford Rest Home
et al. (1980), 30 O.R. (2d) 636 (Co. Ct.).
COUNSEL:
John T. Morin, Q.C. and Michael J. W.
Round for appellant.
Marlene I. Thomas for respondent.
SOLICITORS:
Campbell, Godfrey & Lewtas, Toronto, for
appellant.
Deputy Attorney General of Canada for
respondent.
The following are the reasons for judgment
rendered in English by
MAHONEY J.A.: This is an appeal from the
dismissal with costs of the appellant's application
to the Trial Division for mandamus requiring the
respondent to certify its nursing homes under sec
tion 68.24 of the Excise Tax Act, R.S.C., 1985, c.
E-15 (as am. by R.S.C., 1985 (2d Supp.), c. 7, s.
34) [1987] 3 F.C. 622; 87 DTC 5404. The appel
lant owns and operates nursing homes in a number
of Canadian provinces. The only issue is whether
they meet the definition of subsection 68.24(1).
68.24 (1) In this section,
"certified institution" means an institution that by a certificate
issued by the Minister of National Health and Welfare is
certified to be, as of the day specified in the certificate.
(a) a bona fide public institution whose principal purpose is
to provide care for children or aged, infirm or incapacitated
persons, and
(b) in receipt annually of aid from the Government of
Canada or the government of a province for the care of
persons described in paragraph (a);
The learned Trial Judge held [at pages 626-627
F.C.; 5406 DTC]:
There are three prerequisites for an institution to be certified
under this section:
1. it must be a bona fide public institution;
2. it must provide care for children or aged, infirm or
incapacitated persons; and
3. It must be in receipt annually of aid from the Government
of Canada or a province.
There is no disagreement that Extendicare meets conditions
2 and 3. Essentially, the applicant's argument is that by doing
so it also meets condition number 1. To accept that interpreta
tion is to conclude that the first condition is superfluous and
adds nothing to the law. Since Parliament has taken the trouble
to confine the benefit of these provisions, not just to public
institutions, but to bona fide public institutions, those words
cannot be ignored.
It has been recognized as a "settled canon of construction"
that
... a statute ought to be so construed that, if it can be
prevented, no clause, sentence, or word shall be superfluous,
void, or insignificant. (Reg. v. Bishop of Oxford (1879), 4
Q.B.D. 245, at page 261).
After citing additional authorities for that proposi
tion and considering dictionary definitions of
"institution" and "public", he concluded [at pages
628-629 F.C.; 5407 DTC] that each nursing home
was not a bona fide public institution because:
Finally, the term "bona fide", when used as an adjective, is
generally taken to mean "honestly", "genuinely" or "in good
faith". (See Stroud's Judicial Dictionary, 4th Ed., (London,
1971), at pages 302-305). It seems obvious that Parliament
used these specific words to emphasize that tax exemptions
should be reserved for organizations which, in addition to
providing health care to the public, are either publicly owned or
publicly operated.
Indeed, that appears to be the only interpretation which
would accomplish the statute's purpose. The object of section
[68.24] is to relieve organizations which are supported entirely
by tax money from paying further taxes. If an institution is
created and supported by the taxpayers through one taxing
authority, it doesn't make sense for it to pay taxes to another.
There is no reason to conclude, however, that Parliament
intended by section [68.24] to improve the profit picture of a
privately-owned company even if it does provide health care
services to the public.
In this conclusion, the learned Trial Judge has
accepted the respondent's position set forth in his
decision, Appeal Book, page 21.
I would like to draw your attention to the definition of the
term "bona fide public" institution as it appears in our guide
lines. It is defined as being "an institution which has been
verified as one which derives its operational authority and
support from public sources as opposed to one which is owned
and operated by an individual or individuals for private pur
poses or personal gain. A bona fide public institution would
normally be incorporated under provincial legislation, such as
the Societies Act governing non-profit corporations or under
Part 2 of the Companies Act of Canada or recognized as being
charitable or non-profit for purposes of the Federal Income Tax
Act."
There was no evidence upon which the learned
Trial Judge could conclude that certification, with
the consequent entitlement to apply for the refund
of excise tax paid would necessarily improve the
applicant's profit picture. That is speculation. It
may equally be speculated that any refund would
be offset by reduced government subsidy. The
proposition that a certified institution must be
supported "entirely by tax money" is not borne out
by the definition, which requires only that it be "in
receipt annually of aid from federal or provincial
governments." It stipulates no proportion, much
less 100%. Those conclusions, however, do not go
to the ratio, which is that such an institution must
be "either publicly owned or operated" in the sense
that it must be operated as a charity or not for
profit. With respect, those are words and concepts
demonstrably well known in Canadian tax legisla
tion which are not encompassed in the concept of
bona fides.
It seems to me that the term "bona fide public"
is intended to convey the intent that the care
provided by an institution be truly offered to the
public and not just to a select segment. Examples
come readily to mind. I shall not set out a list, as it
is equally easy to visualize litigation as to some,
but what of an institution which ostensibly offers
care generally to one of the stipulated categories
but refuses admission on irrelevant discriminatory
bases? The good faith of its professed public char
acter may be questioned. The modifier "bona fide"
can be given an effect in the definition which is
consonant with its generally accepted meaning as
rightly recognized by the learned Trial Judge.
I would also note that where, in the Act, Parlia
ment has chosen to limit refund entitlement to
manifestations of another level of government, it
has done so by specific reference to municipal and
provincial governments and instrumentalities, e.g.
sections 68.14, 68.26, 68.27. Likewise, the Act
provides specific opportunities for refund to profit-
making undertakings, e.g. sections 68.16, 68.28.
Eligibility for refunds under the Act is not an
end in itself. In some instances, it appears clearly
intended to relieve against indirect taxation of the
Crown in right of the provinces. In others, Parlia
ment has crafted the legislation to benefit certain
activities in a way it deems desirable. Those activi
ties may be variously carried on by government
instrumentalities and/or non-governmental organi
zations or persons. I see no proper basis for read
ing into the provisions, as they apply to non-gov-
emmental organizations or persons, an exclusion
where there is the intention of making a profit.
In Struthers v. Town of Sudbury (1900), 27
O.A.R 217, the Ontario Court of Appeal dealt
with a provision of the provincial The Assessment
Act [R.S.O. 1887, c. 193] which exempted, inter
alia, public hospitals from assessment. Of the hos
pital in issue, it was said at pages 218 ff.,
It is the private property of the plaintiffs, who are practising
physicians in the town of Sudbury, and all the profits and gains
derived from its management are their own personal profits and
gains.
The circumstance mainly relied upon as establishing the
character of the hospital as a public hospital, in addition to the
fact that a comparatively general and extensive relief for sick
and poor is administered there, is, that it has been placed upon
the list of institutions receiving provincial aid from public
moneys under the Charity Aid Act.
The taxing statute did not define the term "public
hospital". Osler J.A., at pages 221 ff., held:
In the present case the charitable element, if that were
essential, is not wholly wanting, although it is not very promi
nently put forward. I find, however, nothing in the Assessment
Act, which, ... restricts the exemption to the case of hospitals
wholly or in part supported by charity.
In the absence of any legislative declaration on the subject, and
the words "public hospital" having no technical meaning or any
precise legal meaning, it seems more reasonable to hold that
they are used in their popular sense and that any institution
which, though not in a strictly legal right, in a popular sense
may be called a public hospital, may claim exemption ... We
here have a hospital, in which as a building, hospital accommo
dation is provided for all in that part of the country who are
able, to the extent of such accommodation, to take advantage of
it. This accommodation is subject to the control and supervision
of the Government on behalf of the public, and public funds are
by statute contributed to its support. Had it been intended that
the exemption should be confined to a corporate institution or
one wholly or in part supported by charity, I think the Legisla
ture would have said so, but, if there is nothing inconsistent in
an institution owned by private persons and managed for their
own gain, being a public hospital so far as the benefits and
advantages conferred upon the public thereby are concerned,
we may properly hold that the Sudbury General Hospital is a
public hospital and entitled to exemption under the Act.
Maclennan J.A., agreed in the result but would
have disposed of the appeal on the basis of the
hospital's recognition under The Charity Aid Act
[R.S.O. 1887, c. 248]. The remaining judges evi
dently concurred with both.
I find the reasoning of Osier J.A., most persua
sive. What was said of the Sudbury hospital may,
on the evidence, be said mutatis mutandis of the
appellant's nursing homes. Nursing home accom
modation is provided for all who are able, to the
extent of such accommodation, to take advantage
of it. The nursing homes are all subject to the
control and supervision of provincial governments
on behalf of the public and public funds are con
tributed to all by both federal and provincial gov
ernments. Had it been intended that the refund be
available only to nursing homes run by govern
ments or as charities, Parliament could easily have
said so. There is nothing inconsistent in a regulat
ed nursing home, operated for gain, being a public
institution in so far as concerns the benefits there
by conferred on the public.
Since the only basis upon which certification
was refused by the respondent was that the defini
tion of section 68.24 required exclusion of an
institution operated in expectation of profit, I
would allow the appeal with costs here and in the
Trial Division and, pursuant to subparagraph
52(b)(î) of the Federal Court Act [R.S.C., 1985,
c. F-7], direct the respondent to grant the applica
tion for certification.
HEALD J.A.: I concur.
* * *
The following are the reasons for judgment
rendered in English by
MACGUIGAN J.A. (dissenting): The issue in
this case is essentially whether the appellant is
excluded from eligibility for a federal sales tax
refund under the Excise Tax Act ("the Act") by
reason of being a profit-making company.
The only disputed aspect of the definition in
section 68.24 as to which bodies may be so certi
fied is that it must be "a bona fide public institu
tion." In holding that the appellant was not en
titled to be a "certified institution" the learned
Trial Judge said [at pages 627-629 F.C.; 5406-
5407 DTC]:
What, then, is a bona fide public institution? The word
"institution" was given careful consideration by Kovacs Co.Ct.
J. in Re Attorney-General of Ontario and Tufford Rest Home
et al. (1980), 30 O.R. (2d) 636 (Co. Ct.). In that case he was
deciding whether a privately-owned nursing home was subject
to inspection under the The Public Institutions Inspection Act,
1974, S.O. 1974, c. 64. He began with dictionary definitions (at
pages 639-640):
I was given various definitions of "institution". The New
Oxford Dictionary defines "institution" as:
3. Organization for promotion of some public object, reli
gious, charitable, reformatory, etc.; building used by this;
(esp. pop.) building used by benevolent or educational
institution.
The Oxford English Dictionary gives the definition:
7. An establishment, organization, or association, institut
ed for the promotion of some object, esp. one of public or
general utility, religious, charitable, educational, etc., e.g.,
a church, school, college, hospital, asylum, reformatory,
mission, or the like.
It would appear that the connotation of "institution" bears
with it the concept of it having a public object. The evidence
was that the private company operating the nursing home in
this instance had the object of operating a nursing home for
private profit. I hold that the concept of private profit is alien
to the generally-accepted meaning of an institution. I note as
well that the Act is entitled, in s. 9, as "The Public Institu
tions Inspection Act, 1974". (Emphasis added.) Accordingly,
the concept of "institution" having a connotation of a public
object, as distinguished from a private enterprise, is rein
forced by the adjective "public" used in the title to the Act.
I accordingly hold that privately operated nursing homes
are not "institutions" within the meaning of s. 4 of the Public
Institutions Inspection Act, 1974.
I find this analysis very appropriate to the problem we are
considering in this case. I would observe that, as in the statute
before Kovacs Co.Ct. J., section 44.25 reinforces the word
"institution" with the adjective "public". Black's Law Diction
ary [Fifth Edition] defines a "public institution" as
Institution ... .
Public Institution. One which is created and exists by law or
public authority, for benefit of public in general; e.g., a public
hospital, charity, college, university, etc.
The Shorter Oxford English Dictionary [Third Edition] gives
the adjective "public" as meaning:
1. Of or pertaining to the people as a whole; ... 2. Done or
made by or on behalf of the community as a whole; ...
3. That is open to may be used by, or may or must be shared
by, all members of the community; generally accessible or
available ... Also (in narrower sense), That may be used,
enjoyed, shared or competed for, by all persons legally or
properly qualified; ... 4. Open to general observation; ... 5.
Of, pertaining to, or engaged in the affairs or service of the
community. ... 6. Of or pertaining to a person in the
capacity into which he comes into contact with the commu
nity; ... 7. Devoted or directed to the promotion of the
general welfare; public-spirited, patriotic. Now chiefly in
phr. p. spirit.
Finally, the term "bona fide", when used as an adjective, is
generally taken to mean "honestly", "genuinely" or "in good
faith". (See Stroud's Judicial Dictionary, 4th Ed., (London,
1971) at pages 302-305). It seems obvious that Parliament used
these specific words to emphasize that tax exemptions should
be reserved for organizations which, in addition to providing
health care to the public, are either publicly owned or publicly
operated.
Indeed, that appears to be the only interpretation which
would accomplish the statute's purpose. The object of section
44.25 [now s. 68.24] is to relieve organizations which are
supported entirely by tax money from paying further taxes. If
an institution is created and supported by the taxpayers
through one taxing authority, it doesn't make sense for it to pay
taxes to another. There is no reason to conclude, however, that
Parliament intended by section 44.25 to improve the profit
picture of a privately-owned company even if it does provide
health care services to the public.
The Trial Judge may have been in error in the
last paragraph cited above where he stated the
object of the Act in terms limited to "organiza-
tions which are supported entirely by tax money."
There seems to' be nothing in the Act to support
such an interpretation, and I agree with my broth
er Mahoney J.A. that there is no evidence in the
record that any refund would necessarily improve
the appellant's profit picture.
Nevertheless, as Mr. Justice Mahoney states,
the real issue is whether certification must be
limited to non-profit-making organizations, a cate
gory which admittedly excludes the appellant.
The appellant relied heavily on Struthers v.
Town of Sudbury (1900), 27 O.A.R. 217, in which
the Ontario Court of Appeal held that the private-
ly owned Sudbury General Hospital was a "public
hospital" within the meaning of the Ontario The
Assessment Act [R.S.O. 1887, c. 193]. In the
principal judgment for a five-judge Court Osler
J.A. said (at page 222):
In the absence of any legislative declaration on the subject, and
the words "public hospital" having no technical meaning or any
precise legal meaning, it seems more reasonable to hold that
they are used in their popular sense and that any institution
which, though not in a strictly legal right, in a popular sense
may be called a public hospital, may claim exemption: Harri-
son's Municipal Manual, 5th ed., p. 716. We here have a
hospital, in which as a building, hospital accommodation is
provided for all in that part of the country who are able, to the
extent of such accommodation, to take advantage of it. This
accommodation is subject to the control and supervision of the
Government on behalf of the public, and public funds are by
statute contributed to its support. Had it been intended that the
exemption should be confined to a corporate institution or one
wholly or in part supported by charity, I think the Legislature
would have said so, but, if there is nothing inconsistent in an
institution owned by private persons and managed for their own
gain, being a public hospital so far as the benefits and advan
tages conferred upon the public thereby are concerned, we may
properly hold that the Sudbury General Hospital is a public
hospital and entitled to exemption under the Act.
This conclusion of Osler J.A. can be fully under
stood only if read in the context of his earlier
statement as to the statutory public funds being
paid to the hospital (at page 219):
The circumstance mainly relied upon as establishing the
character of the hospital as a public hospital, in addition to the
fact that a comparatively general and extensive relief for sick
and poor is administered there, is, that it has been placed upon
the list of institutions receiving provincial and from public
moneys under the Charity Aid Act, R.S.O. (1887) ch. 248.
This fact is more clearly emphasized by Maclen-
nan J.A. in concurring reasons as follows (at pages
222-223):
I agree that this appeal must be dismissed.
It is not necessary to say what would be the proper conclu
sion but for the legislative recognition of the appellants' hospi
tal under the provisions of the Act to regulate Public Aid to
Charitable Institutions, R.S.O. (1887), ch. 248. But having
regard to that recognition, I think we ought to hold, as was
done by the learned Chief Justice, that although in many
respect the hospital is a private enterprise, the order-in-council,
ratified by resolution of the Assembly, under statutory author
ity, has given to it a public character, which makes it a "public
hospital" within the meaning of the exemption clause of the
Assessment Act.
Since the other three judges are described as
having simply concurred, which presumably must
be taken to mean with both Osier and Maclennan
JJ.A., one must conclude that they found the
reasoning of the two compatible with each other.
Indeed, in my analysis both Judges decided as they
did for the same reason, viz., the statutory recogni
tion of the hospital in the The Charity Aid Act of
1887 [R.S.O. 1887, c. 248]. There is nothing in
the Excise Tax Act comparable to the recognition
provided by the list of specific hospitals in
Schedule A of the The Charity Aid Act (to which
the Sudbury General Hospital had been added by
Order in Council approved by the Legislature in
1895). Moreover, even apart from this factor of
statutory recognition, Struthers declares the
meaning of "public hospital," not "public institu
tion." It is the latter phrase of which the ordinary
meaning must be sought, following the dictum of
Osier J.A.
There is nothing in the context of the words in
the Excise Tax Act which appears to offer any
guidance. It is true that the Act provides for
refunds to some profit-making undertakings, but
only in very specific situations which have no
relevance to the case at bar: section 68.16 (con-
cerning gasoline purchased for the sole use of
certain named purchasers), section 68.28 (con-
cerning certain qualified goods purchased for the
sole use of small manufacturers or producers pre
scribed by regulation).
I find myself in agreement with the decision of
Kovacs Co.Ct. J. in the Tufford case [Re Attor-
ney-General of Ontario and Tufford Rest Home
et al. (1980), 30 O.R. (2d) 636 (Co.Ct.)] cited by
the Trial Judge that the concept of institution,
when reinforced with the adjective "public", does
not include the notion of private profit. This exclu
sion of profit-making is consistent with the defini
tion of public institution in Black's Law Diction
ary, Fifth Edition 1979, which the Trial Judge
cited [at pages 628 F.C.; 5407 DTC]:
Institution ... .
Public institution. One which is created and exists by law or
public authority, for benefit of public in general; e.g. a public
hospital, charity, college, university, etc.
If the term bona fide adds anything to "public
institution", it can only be to strengthen its non-
profit-making character.
In my view this language usage was not effec
tively challenged by the appellant. It is, perhaps,
not the best-chosen language to exclude profit-
making ventures, but in my view its meaning is
nevertheless plain.
I would therefore dismiss the appeal with costs.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.