A-460-86
Louis Vaillancourt (Appellant) (Plaintiff)
v.
Her Majesty the Queen, represented by Deputy
Minister of National Revenue (Respondent)
(Defendant)
and
Canada Mortgage and Housing Corporation (Mise
en cause)
INDEXED AS: VAILLANCOURT V. DEPUTY M.N.R. (CA.)
Court of Appeal, Hugessen, Desjardins and
Décary JJ.A.—Québec, May 1; Ottawa, May 15,
1991.
Income tax — Income calculation — Capital cost allowance
— Co-owner by declaration of single unit in building, certified
"multiple-unit residential unit" (MURB), denied deduction
under Income Tax Regs., Sch. II, Class 31 — Need not have
right of ownership in entire building, or more than one unit, for
deduction — Right of ownership in building consisting of
multiple units, not in units themselves, required — Class 31
not limited to certain types of right of ownership — Building's
purpose residential — Once residential purpose certified by
CMHC, onus on M.N.R. to show certificate wrongly issued.
Civil Code — Taxpayer purchasing fraction of building
subject to declaration of co-ownership registered pursuant to
Civil Code, arts. 441b et seq. — Capital cost deduction under
Income Tax Regs. disallowed — Whether right of ownership
in entire building required for deduction — Minister erred in
fact and law in submitting taxpayer exclusive owner of frac
tion of MURB, not owner of undivided share in building
Co-ownership by declaration in Quebec civil law embracing
right of exclusive ownership to exclusive portion and "undi-
vided right of ownership" in common portions, neither one of
which can exist without other — According to deed of sale,
taxpayer owner of undivided part of building.
Construction of statutes — Income Tax Regs., Sch. II, Class
31 capital cost deduction for MURB — Whether right of
ownership in more than one unit required for deduction;
whether building's purpose residential — Words-in-total-
context approach to interpretation of taxing statutes — Refer
ence to budget speech, Interpretation Bulletins — "MURB"
defined neither in Act nor Regulations — Income Tax Act, s.
248 definition of 'property" considered.
This was an appeal from the trial judgment dismissing an
appeal from an income tax reassessment for 1980. The appel
lant bought a fraction of a building which was the subject of a
declaration of co-ownership registered pursuant to articles 441b
et seq. of the Civil Code of Lower Canada. The fraction
included an exclusive portion of the building and a share of the
undivided rights in the common portions. The building, located
at the foot of a ski hill, contained 44 units. Canada Mortgage
and Housing Corporation (CMHC) had issued a certificate of
construction of a "multiple-unit residential building" (MURB).
Under Income Tax Regulations, section 1100 a taxpayer may
deduct 5 per cent of the undepreciated capital cost of Class 31
property (MURB's). The appellant's depreciation deduction
under Class 31 was disallowed on the ground that the fraction
he owned did not constitute a MURB. The respondent argued
that Class 31 requires a right of ownership in each one, or at
least in more than one, of the "multiple units" of the building
to qualify for the deduction. Alternatively, it was argued that a
residential building is a place where someone habitually resides
and that the building in question was not a "residential build
ing", as the multiple units were not used by their occupants
"more or less permanently", but for short periods. The issues
were (1) whether co-ownership by declaration of a fraction of a
building makes the coproprietor the owner of a MURB and (2)
whether the purpose of the building was residential.
Held, the appeal should be allowed.
The new approach to interpretation of tax legislation is the
words-in-total-context approach with a view to determining the
object and spirit of the provisions. The courts will also refer to
parliamentary debates when the latter rise above mere parti
sanship, and, in tax matters, to the budget speech by the
Minister of Finance. Finally, while Interpretation Bulletins do
not bind the Minister, taxpayer or courts, they are useful in
interpreting the Act and courts are increasingly willing to see
an ambiguity in the legislation and to use them when the
interpretation given in a Bulletin squarely contradicts that
suggested by the Department in a given case. When a taxpayer
engages in business activity and the legality of that activity is
confirmed in an Interpretation Bulletin, it is only fair to seek
the meaning of the legislation in that bulletin also.
In the absence of a definition of MURB either in the Act or
the Regulations, and in the context of a depreciation deduction,
there was no reason to require a taxpayer claiming a deduction
for depreciable property to have acquired all of that property.
"Property" is defined as "property of any kind whatever ...
and ... includes a right of any kind whatever". That definition
is broad enough to include a portion or fraction of property. A
right of co-ownership by declaration is "a right of any kind
whatever" in the building, in the same way as an undivided
right of co-ownership. Additionally, the right of ownership
required by Class 31 in respect of a MURB is a right of
ownership in a building consisting of multiple units, not a right
of ownership in the multiple units as such. The wording of
Class 31 does not support limiting its application only to certain
types of right of ownership or requiring that the right of
ownership extend to each or to many of the units.
Furthermore, the respondent erred in fact and law in submit
ting that taxpayer was exclusive owner of a fraction of a
multiple-unit building, not owner of an undivided share in the
building. It was an error of fact because the deed of sale
showed the appellant had purchased a fraction of the building,
including an exclusive portion of the building and a share of the
undivided rights to the common areas. The appellant was the
owner of an undivided part of the building. It was an error of
law because the concept of co-ownership by declaration in
Quebec civil law embraces two inseparable rights which have
no meaning unless they exist together — the right of exclusive
ownership to an exclusive portion and "an undivided right of
ownership" in the common portions.
The above interpretation was supported both by the budget
speech and Interpretation Bulletin IT-367R2, whereas the
respondent's interpretation leads to the absurd result that the
appellant would only have had to acquire two fractions instead
of one in order to claim the deduction.
The purpose of the building was residential. Once the
CMHC certificate had been issued, absent allegations of bad
faith or deceit, the Court could not impose on the taxpayer the
burden of establishing that the intended use was not what it
was on paper. The onus was on the Department to show that
the certification had been wrongly issued or the intended use
had been changed. That burden had not been discharged. The
Interpretation Bulletin stated that a building is "residential" if
it is intended "to provide, on a more or less permanent basis,
the place of residence or abode of its occupants". "On a more
or less permanent basis" does not preclude the possibility, as in
this case, of more or less long-term rental. The contrast of
"residential" with "commercial use" indicated that the Depart
ment was trying to avoid the eventual use of units for commer
cial purposes that would be inconsistent with residential occu
pancy. The declaration of ownership prohibited room rental in
any part used for commercial or professional purposes. This
was a formal statement of the residential use to which the
building would be put. Finally, taxpayer has never paid munic
ipal business taxes on his fraction, which was taxed as a
"dwelling".
STATUTES AND REGULATIONS JUDICIALLY
CONSIDERED
Civil Code of Lower Canada, arts. 441b, 441c, 441d,
441e, 441h, 441k, 4411, 441m, 441n, 442h.
Income Tax Act, S.C. 1970-71-72, c. 63, ss. 20(1)(a),
248(1).
Income Tax Regulations, C.R.C., c. 945, ss.
I 100(1)(a)(xxii) (as am. by SOR/78-377, s. 3; 83-340,
s. I), Sch. II, Class 31 (as am. by SOR/78-146, s. 3;
81-244, s. 3).
CASES JUDICIALLY CONSIDERED
APPLIED:
Stubart Investments Ltd. v. The Queen, [1984] 1 S.C.R.
536; [1986] CTC 294; (1984), 84 DTC 6305; 53 N.R.
241; Lor-Wes Contracting Ltd. v. The Queen, [1986] 1
F.C. 346; [1985] CTC 79; (1985), 85 DTC 5310; 60
N.R. 321 (C.A.); Jones v Skinner (1835), 5 L.J. Ch. 87.
REVERSED:
Vaillancourt (L.) v. The Queen, [1987] 1 C.T.C. 1
(Eng.); [1986] 2 C.T.C. 188 (Fr.); (1986), 86 DTC 6531
(Eng.); 86 DTC 6449 (Fr.); 7 F.T.R. 172 (F.C.T.D.).
REFERRED TO:
Edmonton Liquid Gas Ltd v The Queen, [1984] CTC
536; (1984), 84 DTC 6526; 56 N.R. 321 (F.C.A.);
Canada (Attorney General) v. Young, [1989] 3 F.C. 647;
(1989), 27 C.C.E.L. 161; 89 CLLC 14,046; 100 N.R. 333
(C.A.); Harel v. Dep. M. Rev. of Quebec, [1978] 1
S.C.R. 851; (1977), 80 D.L.R. (3d) 556; [1977] CTC
441; 77 DTC 5438; 18 N.R. 91; Nowegijick v. The
Queen, [1983] 1 S.C.R. 29; (1983), 144 D.L.R. (3d) 193;
[1983] 2 C.N.L.R. 89; [1983] CTC 20; 83 DTC 5041; 46
N.R. 41; Bryden v. Canada Employment and Immigra
tion Commission, [1982] 1 S.C.R. 443; (1982), 133
D.L.R. (3d) 1; 82 CLLC 14,175; 41 N.R. 180; Mattabi
Mines Ltd. v. Ontario (Minister of Revenue), [1988] 2
S.C.R. 175; (1988), 53 D.L.R. (4th) 656; [1988] 2
C.T.C. 294; 87 N.R. 300; 29 O.A.C. 268; Fasken, David
v. Minister of National Revenue, [1948] Ex.C.R. 580;
[1948] C.T.C. 265; (1948), 49 DTC 491; R. v. Marsh &
McLennan, Limited, [1984] 1 F.C. 609; [1983] CTC 231;
(1983), 83 DTC 5180; 48 N.R. 103 (C.A.); Golden v.
The Queen, [1983] 2 F.C. 599; [1983] CTC 112; (1983),
83 DTC 5138; 47 N.R. 117 (C.A.); Beament et al. v.
Minister of National Revenue, [1970] S.C.R. 680;
(1970), 11 D.L.R. (3d) 237; [1970] C.T.C. 193; 70 DTC
6130; Lovell, J.P. v. The Queen (1989), 90 DTC 6116
(F.C.T.D.).
AUTHORS CITED
Canada. House of Commons Debates, Vol. II, 1st Sess.,
30th Parl., 23 Eliz. II, 1974.
Côté, Pierre-André. The Interpretation of Legislation in
Canada, Cowansville, Qué.: Editions Yvon Blais Inc.,
1984.
COUNSEL:
Daniel Bourgeois for appellant (plaintiff).
Paul E. Plourde for respondent (defendant).
SOLICITORS:
Grondin, Poudrier, Bernier, Québec, for
appellant (plaintiff).
Deputy Attorney General of Canada for
respondent (defendant).
The following is the English version of the
reasons for judgment rendered by
DÉCARY J.A.: The Court has before it an appeal
from a judgment by Pinard J. [[1987] 1 C.T.C. 1
(Eng.)], which dismissed the appeal brought by
the appellant from a notice of reassessment issued
by the Deputy Minister of National Revenue for
the 1980 taxation year.
The appellant, together with five partners,
bought from Château Mont Ste-Anne Inc. a frac
tion ("the fraction") of a building ("the building")
which was the subject of a declaration of co-
ownership registered pursuant to the provisions of
articles 441b et seq. of the Civil Code of Lower
Canada ("co-ownership by declaration"). This
fraction of the building included an exclusive por
tion of the said building, described as subdivision
658-40 of the official cadastre of the parish of
Ste-Anne, Montmorency registry division ("the
exclusive portion") and a share of the undivided
rights in the common portions of the building
relating to the exclusive portion, designated as
subdivision 658-1 of the said cadastre ("the undi
vided portion"). The building contained forty-four
units and was part of a large recreational complex
located at the foot of Mont Ste-Anne, about forty
kilometres from Québec.
At the time of the purchase, a certificate ("the
certificate") of the construction of a "multiple-unit
residential building" ("MURB", or in French
"immeuble résidentiel à logements multiples",
"IRLM") had been issued for the building by the
Canada Mortgage and Housing Corporation ("the
CMHC") under Classes 31 and 32, Schedule II
(formerly B) of the Income Tax Regulations
[C.R.C., c. 945 (as am. by SOR/78-146, s. 3;
81-244, s. 3)]. The certificate described the build
ing as follows: "condominium".
The appellant filed an individual federal income
tax return for 1980 in which he claimed a deduc
tion for depreciation and in which, applying in his
favour the provisions of Class 31 of Schedule II of
the Regulations, he reported a net rental loss on
the fraction of the building owned by him.'
In a notice of reassessment the respondent
subsequently informed the appellant that she was
disallowing the depreciation deduction requested,
on the ground that the fraction in question was not
a "multiple-unit residential building" within the
meaning of Class 31.
The appellant then brought an unsuccessful
action in the Federal Court Trial Division to have
this notice of reassessment invalidated: hence the
appeal at bar.
Relevant legislation and regulations
Income Tax Act
(S.C. 1970-71-72, c. 63, as amended)
Paragraph 20(1)(a):
20. (1) Notwithstanding paragraphs 18(1 )(a), (b) and (h),
in computing a taxpayer's income for a taxation year from a
business or property, there may be deducted such of the
following amounts as are wholly applicable to that source or
such part of the following amounts as may reasonably be
regarded as applicable thereto:
(a) such part of the capital cost to the taxpayer of property,
or such amount in respect of the capital cost to the taxpayer
of property, if any, as is allowed by regulation;
Subsection 248(1):
248. (1) ..
"property" means property of any kind whatever whether real
or personal or corporeal or incorporeal and, without restrict
ing the generality of the foregoing, includes
(a) a right of any kind whatever ....
' The appellant set his loss at $3,700, that is one-sixth of the
net loss of the fraction, set at $22,200. It does not matter for
the purposes of this proceeding that the fraction was bought by
six persons rather than one. Thus, to facilitate understanding
the case, I will treat the appellant as the sole owner of the
fraction.
"self-contained domestic establishment" means a dwelling
house, apartment or other similar place of residence in which
place a person as a general rule sleeps and eats ....
Income Tax Regulations
(C.R.C., c. 945, as amended)
Subparagraph 1100(1)(a)(xxii) [as am. by SOR/
78-377, s. 3; 83-340, s. 1]:
1100. (1) For the purposes of paragraph 20(1)(a) of the Act,
there is hereby allowed to a taxpayer, in computing his income
from a business or property, as the case may be, deductions for
each taxation year equal to
Rates
(a) such amounts as he may claim in respect of property of
each of the following classes in Schedule II not exceeding in
respect of property
(xxii) of Class 31, 5 per cent,
of the undepreciated capital cost to him as of the end of
the taxation year (before making any deduction under this
subsection for the taxation year) of property of the class
SCHEDULE II
CAPITAL COST ALLOWANCES
Class 31
(5 per cent)
Property that is a multiple-unit residential building in
Canada that would otherwise be included in Class 3 or Class 6
and in respect of which
(a) a certificate has been issued by Canada Mortgage and
Housing Corporation certifying
(i) in respect of a building that would otherwise be includ
ed in Class 3, that the installation of footings or any other
base support of the building was commenced
(A) after November 18, 1974 and before 1980, or
(B) after October 28, 1980 and before 1982,
as the case may be, and
and that, according to plans and specifications for the build
ing, not less than 80 per cent of the floor space will be used
in providing self-contained domestic establishments and
related parking, recreation, service and storage areas;
(b) not more than 20 per cent of the floor space is used for
any purpose other than the purposes referred to in paragraph
(a);
Civil Code of Lower Canada
CHAPTER THIRD
OF CO-OWNERSHIP OF IMMOVEABLES
ESTABLISHED BY DECLARATION
Art. 441b. The provisions of this chapter govern every
immoveable made subject thereto by the registration of a
declaration of co-ownership whereby the ownership of the
immoveable is apportioned between its proprietors in fractions,
each comprising an exclusive portion and a share of the
common portions.
A person, even acting alone, may register a declaration of
co-ownership and therein declare himself proprietor of each
fraction.
Art. 441c. Each fraction constitutes a separate entity and
may be the object of a total or partial alienation comprising in
each case the share of common portions pertaining to the
fraction or portion of a fraction alienated.
Art. 441d. Each coproprietor has an undivided right of
ownership in the common portions; his share in the common
portions is equal to the value of the exclusive portion of his
fraction in relation to the aggregate of the values of the
exclusive portions.
Art. 441e. The common portions and the rights accessory
thereto cannot be the object, separately from the exclusive
portions, of an action in partition or of a forced licitation.
Art. 441h. Each coproprietor disposes of the exclusive por
tions included in his fraction; he uses and enjoys freely the
exclusive portions and the common portions provided that he
does not impair the rights of the other coproprietors or the
destination of the immoveable.
Art. 441k. Each of the coproprietors is bound to contribute,
in accordance with the provisions of the declaration of co-
ownership or, failing such, in proportion to the relative value of
his fraction established in the declaration of co-ownership, to
all costs resulting from the co-ownership and the operation of
the immoveable and particularly to the costs of conservation,
maintenance and administration of the common portions and to
the expenses caused by the operation of the common services.
Art. 4411. The declaration of co-ownership defines the desti
nation of the immoveable and of its exclusive and common
portions, of which it gives a detailed description; it determines
the relative value of each fraction, having regard to the nature,
area and situation of the exclusive portion which it comprises,
but without taking its utilization into account and, subject to
the provisions of this chapter, specifies the conditions of enjoy
ment of the common portions and utilization of the exclusive
portions, and lays down the rules for the administration of the
common portions.
Art. 441m. The declaration of co-ownership must be in the
form of a notarial deed en minute; the same applies to the
amendments made thereto.
The registration of such declaration and of the amendments
thereto is effected by deposit.
Art. 441n. The declaration of co-ownership and the amend
ments thereto are binding upon the coproprietors and their
successors by general title.
They are binding upon their successors and assigns by par
ticular title from the date of the registration of their rights.
Art. 442h. Except by unanimous vote, the coproprietors
cannot directly or indirectly change the destination of the
immoveable.
Arguments of parties
Counsel for the respondent argued, to begin
with, that in order to qualify for the deduction
allowed by Class 31, a person should have a right
of ownership in each one, or at least in more than
one, of the "multiple units" of the building, and
that accordingly an undivided coproprietor of the
entire building would be eligible, since this type of
co-ownership confers rights over each unit, but a
coproprietor by declaration of a single unit would
not be eligible since this type of co-ownership in
his submission really only confers rights over
whichever one of the units the coproprietor owns
exclusively. In this regard, counsel for the respond
ent said he completely agreed with the conclusion
at which the Trial Judge arrived, as follows [at
page 5]:
In the case at bar, it is of the very essence of the provision
contained in Class 31 that the property must be "a multiple-
unit residential building in Canada". To my way of thinking,
all these words must be read and applied together to the
property defined in the class. Accordingly, a residential build
ing in Canada consisting of a single unit must be excluded from
the definition; similarly, each of the multiple units of a residen
tial building in Canada, taken separately, must be excluded
from the definition.
As in the case at bar the plaintiff was not claiming a
depreciation deduction in respect of a multiple-unit residential
building in Canada, but in respect of one of the multiple units,
namely unit 29, of a larger building containing some 44 units,
he thus cannot benefit from the provision in Class 31 of
Schedule 11 of the Regulations.
Secondly, counsel for the respondent argued
that regardless of his first argument the building
in the case at bar is not a "residential building",
as, he wrote, the evidence did not show that the
multiple units in this building were used by their
occupants "more or less permanently" rather than
"for short periods". The Trial Judge did not have
to rule on this second argument.
Counsel for the appellant, for his part, argued
that nothing in the phrase "multiple-unit residen
tial building" prevents it being applicable to the
fraction of such a building held under the legal
arrangement of co-ownership by declaration. He
further argued that a building may be described as
residential even though its occupants use it only
for short periods.
Rules for interpreting tax legislation
When the Court has to interpret the provisions
of tax legislation allowing a reduction of the tax
burden, the traditional rule was that the taxpayer's
argument clearly fell within the exemption provi
sion and any doubt was resolved in favour of the
Government. This strict rule of interpretation was
qualified by the Supreme Court of Canada in
Stubart Investments Ltd. v. The Queen as
follows: 2
I would therefore reject the proposition that a transaction
may be disregarded for tax purposes solely on the basis that it
was entered into by a taxpayer without an independent or bona
fide business purpose. A strict business purpose test in certain
circumstances would run counter to the apparent legislative
intent which, in the modern taxing statutes, may have a dual
aspect. Income tax legislation, such as the federal Act in our
country, is no longer a simple device to raise revenue to meet
the cost of governing the community. Income taxation is also
employed by government to attain selected economic policy
objectives. Thus, the statute is a mix of fiscal and economic
policy. The economic policy element of the Act sometimes takes
the form of an inducement to the taxpayer to undertake or
redirect a specific activity. Without the inducement offered by
the statute, the activity may not be undertaken by the taxpayer
for whom the induced action would otherwise have no bona fide
business purpose. Thus, by imposing a positive requirement that
there be such a bona fide business purpose, a taxpayer might be
barred from undertaking the very activity Parliament wishes to
encourage. At minimum, a business purpose requirement might
inhibit the taxpayer from undertaking the specified activity
which Parliament has invited in order to attain economic and
perhaps social policy goals. Examples of such incentives I have
already enumerated.
Indeed, where Parliament is successful and a taxpayer is
induced to act in a certain manner by virtue of incentives
prescribed in the legislation, it is at least arguable that the
z [1984] 1 S.C.R. 536, at pp. 575-576 and 578.
taxpayer was attracted to these incentives for the valid business
purpose of reducing his cash outlay for taxes to conserve his
resources for other business activities. It seems more appropri
ate to turn to an interpretation test which would provide a
means of applying the Act so as to affect only the conduct of a
taxpayer which has the designed effect of defeating the express
intention of Parliament. In short, the tax statute, by this
interpretative technique, is extended to reach conduct of the
taxpayer which clearly falls within "the object and spirit" of
the taxing provisions. Such an approach would promote rather
than interfere with the administration of the Income Tax Act,
supra, in both its aspects without interference with the granting
and withdrawal, according to the economic climate, of tax
incentives. The desired objective is a simple rule which will
provide uniformity of application of the Act across the commu
nity, and at the same time, reduce the attraction of elaborate
and intricate tax avoidance plans, and reduce the rewards to
those best able to afford the services of the tax technicians.
Professor Willis, in his article, supra, accurately forecast the
demise of the strict interpretation rule for the construction of
taxing statutes. Gradually, the role of the tax statute in the
community changed, as we have seen, and the application of
strict construction to it receded. Courts today apply to this
statute the plain meaning rule, but in a substantive sense so
that if a taxpayer is within the spirit of the charge, he may be
held liable ....
While not directing his observations exclusively to taxing
statutes, the learned author of Construction of Statutes (2nd
ed. 1983), at p. 87, E. A. Dreidger, put the modern rule
succinctly:
Today there is only one principle or approach, namely, the
words of an Act are to be read in their entire context and in
their grammatical and ordinary sense harmoniously with the
scheme of the Act, the object of the Act, and the intention of
Parliament.
This is the new approach which MacGuigan J.A.
described in Lor-Wes Contracting Ltd. v. The
Queen' as a "words-in-total-context approach with
a view to determining the object and spirit of the
taxing provisions".
Additionally, in determining the object of the
legislation, this Court no longer hesitates to refer
to the parliamentary debates when the latter rise
above mere partisanship, and in particular in tax
3 [1986] 1 F.C. 346 (C.A.), at p. 352.
matters to refer to the budget speech made by the
Minister of Finance. 4
Finally, since reference will later be made to the
Interpretation Bulletins published by Revenue
Canada, it is worth noting at once the rules gov
erning use of these Bulletins to interpret a particu
lar provision.
It is well settled that Interpretation Bulletins
only represent the opinion of the Department of
National Revenue, do not bind either the Minister,
the taxpayer or the courts and are only an impor
tant factor in interpreting the Act in the event of
doubt as to the meaning of the legislation.' Having
said that, I note that the courts are having increas
ing recourse to such Bulletins and they appear
quite willing to see an ambiguity in the statute
as a reason for using them — when the interpreta
tion given in a Bulletin squarely contradicts the
interpretation suggested by the Department in a
given case or allows the interpretation put forward
by the taxpayer. When a taxpayer engages in
business activity in response to an express induce
ment by the Government and the legality of that
activity is confirmed in an Interpretation Bulletin,
it is only fair to seek the meaning of the legislation
in question in that bulletin also. As Professor Côté
points out in The Interpretation of Legislation in
Canada: 6 "The administration's presumed author
ity and expertise is never more persuasive than
when the judge succeeds in turning it against its
author, demonstrating a contradiction between the
administration's interpretation and its contentions
before the Court."'
4 See Lor- Wes Contracting Ltd., supra, note 3, at p. 352;
Edmonton Liquid Gas Ltd v The Queen, [ 1984] CTC 536
(F.C.A.), at pp. 546-547; Canada (Attorney General) v. Young,
[1989] 3 F.C. 647 (C.A.), at p. 657; P.-A. Côté, The Interpre
tation of Legislation in Canada, Yvon Blais, at pp. 347-350.
5 Hare! v. Dep. M. Rev. of Quebec, [1978] 1 S.C.R. 851, at
p. 859, de Grandpré J.; Nowegijick v. The Queen, [ 1983] 1
S.C.R. 29, at p. 37, Dickson J. [as he then was]; Bryden v.
Canada Employment and Immigration Commission, [1982] 1
S.C.R. 443, at p. 450, Ritchie J.; Mattabi Mines Ltd. v.
Ontario (Minister of Revenue), [1988] 2 S.C.R. 175, at pp. 189
and 195 et seq., Wilson J.
6 Supra, note 4, at p. 446.
* Equivalent passage taken from English version of 1st edi
tion of text by P.-A. Côté.
Question one: is coproprietor by declaration of
fraction of building, otherwise eligible, owner of
"multiple-unit residential building"?
Assuming for the purposes of this argument that
the building is a "multiple-unit residential build
ing", the question arising in the case at bar is
whether co-ownership by declaration of a fraction
of that building makes this coproprietor the pur
chaser of "property which is a multiple-unit resi
dential building".
Applying the rules of interpretation which I
noted above, this question must be answered by
considering the relevant provisions in their
"words-in-total-context".
(a) Legislative provisions and context
The expression "property which is a multiple-
unit residential building" is not defined either in
the Act or the Regulations. In the absence of any
definition and in the context of a depreciation
deduction within the meaning of the Act and
Regulations, there is no reason to require a tax
payer claiming a deduction for depreciable prop
erty to have acquired all of that property. The
word "property", in subsection 248(1) of the Act,
"means property of any kind whatever whether
real or personal or corporeal or incorporeal and,
without restricting the generality of the foregoing,
includes (a) a right of any kind whatever ..." (my
emphasis). This definition could hardly be more
inclusive and seems quite broad enough to me to
take in a portion or fraction of property: a person
who acquires a portion or fraction of property
most certainly acquires property.'
' The word "property" (or "bien") has always been regarded
in everyday as well as legal language as having an especially
broad significance. In Jones v Skinner (1835), 5 L.J. Ch. 87, at
p. 90, Lord Langdale, Master of the Rolls, said that "It is well
known that the word `property' is the most comprehensive of all
the terms which can be used, in as much as it is indicative and
descriptive of every possible interest which the party can have".
See also Fasken, David v. Minister of National Revenue,
[1948] Ex. C.R. 580, at p. 591, Thorson P.; R. v. Marsh &
McLennan, Limited, [1984] 1 F.C. 609 (C.A.), at p. 626,
Clement D.J.; Golden v. The Queen, [1983] 2 F.C. 599 (C.A.),
at p. 607, Heald J.; Beament et al. v. Minister of National
Revenue, [1970] S.C.R. 680, at p. 690, Pigeon J.
Indeed, counsel for the respondent did not seek
to persuade the Court of the contrary. He argued
instead that the fraction in question had to be an
undivided portion of the entire property, or at
least, if I understood his arguments correctly, com
prise more than one unit since only a multiple-unit
building qualifies.
This proposition runs directly into two obstacles
which seem to me insurmountable. The first
results from the very definition of "property" cited
above. A right of co-ownership by declaration is
indubitably "a right of any kind whatever" in the
building, in the same way as an undivided right of
co-ownership. Additionally, the right of ownership
required by Class 31 in respect of a "multiple-unit
residential building" is a right of ownership in a
building consisting of multiple units, not a right of
ownership in the multiple units as such. Accord
ingly, the wording of Class 31 does not in any way
support limiting its application only to certain
types of right of ownership or requiring that the
right of ownership extend to each or to many of
the units in the building.
The second and still more conclusive obstacle
arises from the very nature of the right of co-
ownership by declaration. Counsel for the respond
ent, with all due respect, makes a serious error of
fact and of law in saying the following, in his
submission:
... the appellant purchased not a multiple-unit building but a
fraction of such a building. The appellant is exclusive owner of
that fraction (unit 29), not owner of an undivided share in the
building.
The appellant chose co-ownership by declaration rather than
some other form of ownership such as undivided co-ownership
This is an error of fact because, as appears from
the deed of sale itself, the appellant purchased a
fraction of the building which includes both an
exclusive portion of the said building and a share
of the undivided rights to the common areas. The
appellant is clearly the owner of an undivided part
of the building.
It is an error of law because the very concept of
co-ownership by declaration in Quebec civil law
embraces two things which are absolutely insepa-
rable from each other, and have meaning only if
they exist together, namely the right of exclusive
ownership to an exclusive portion and "an undivid
ed right of ownership" (article 441d of the Civil
Code of Lower Canada) in the common portions.
These two rights are real rights, which are each
the subject of separate registration and which
cannot be alienated without each other (articles
441c and 441e). The declaration of co-ownership
"defines the destination of the immoveable and of
its exclusive and common portions, of which it
gives a detailed description", "determines the rela
tive value of each fraction, having regard to the
nature, area and situation of the exclusive portion
which it comprises" and "specifies the conditions
of enjoyment of the common portions and utiliza
tion of the exclusive portions ..." (article 4411).
This declaration of co-ownership is in the form of
a notarial deed (article 441m) and is binding on
"the coproprietors and their successors by general
title" (article 441n). Each of the coproprietors "is
bound to contribute ... to all costs resulting from
the co-ownership and the operation of the immove
able and particularly to the costs of conservation,
maintenance and administration of the common
portions . .." (article 441k). 8
The interpretation suggested by counsel for the
respondent leads to the absurd result that in the
case at bar the appellant would only have had to
acquire two fractions instead of one in order to
make use of the deduction. Additionally, if it is the
co-ownership by declaration as such which is an
obstacle, this would disqualify a person who "even
acting alone", as article 441b of the Civil Code of
Lower Canada puts it, "may register a declaration
of co-ownership and therein declare himself pro
prietor of each fraction", yet such a person would
be owner of all fractions.
(b) Purpose of legislation and budget speech
In the budget speech he made on November 18,
1974, the Minister of Finance said the following: 9
" A very interesting analysis of the concept of co-ownership
by declaration in Quebec civil law was made by Rouleau J. in
Lovell, J.P. v. The Queen (1989), 90 DTC 6116 (F.C.T.D.).
9 House of Commons Debates, 1st Sess., 30th Parl., Vol. II,
1974, p. 1419, at p. 1426. I use the original English version
(Continued on next page)
For reasons already discussed, I am particularly anxious to
provide a quick and strong incentive to the construction of new
rental housing units. I therefore propose to relax for a period
the rule whereby capital cost allowances on rental construction
could not be charged against income from other sources.
Specifically, in respect of new, multiple-unit residential
buildings for rent, started between tonight and December 31,
1975, the capital cost allowance rule will not apply. This means
that an owner of an eligible rental unit will be permitted to
deduct capital cost allowance against any source of income at
any time. I am confident that this measure will attract a
significant amount of private equity capital into the construc
tion of new rental housing. [My emphasis.]
Although these observations do not have the
decisive scope claimed for them by counsel for the
appellant, they illustrate quite clearly the Govern
ment's intention to encourage the construction of
multiple-unit residential buildings and to induce
taxpayers to invest in such buildings in return for
significant depreciation potential. It seems to me it
would be treating the Government as naive to
suggest that it had in mind only the construction of
buildings financed by a single owner. The Minis
ter's choice of words seems revealing in this con
nection: he refers to "new multiple-unit residential
buildings" to describe buildings the construction of
which he wants to encourage, but refers to the
"owner of an eligible rental unit" (my emphasis)
to describe a taxpayer he is seeking to benefit.
These words are quite consistent with the practice
of co-ownership by declaration and reinforce the
(Continued from previous page)
rather than the French, which was cited by the Trial Judge and
which in my opinion is a poor translation of the Minister's
remarks.
textual and contextual interpretation at which I
arrived above.
(c) Interpretation Bulletin
As I have concluded that the legislation presents
no ambiguity and means what the taxpayer says it
means, and as further I believe that the objective
sought by the government reinforces this interpre
tation, it is not really necessary for me to go
further and examine the Interpretation Bulletin
submitted to the Court by counsel for the
appellant.
However, in the event that I am wrong in my
interpretation of the expression "property that is a
multiple-unit residential building" and, according
ly, that expression is not as clear as I have said, I
am pleased to see that Interpretation Bulletin No.
IT-367R2, published on September 7, 1981
regarding "Capital Cost Allowances — Multiple-
Unit Residential Buildings", confirms my conclu
sion in all respects. That Bulletin refers expressly
to the "owner of a unit or interest in such a
building" (section 2), even states that "If an
entire building satisfies the requirements of class
31 or class 32, each unit or ownership interest
therein which has been acquired by a taxpayer for
the purpose of gaining or producing income there
from . .. is considered to be property of class 31 or
class 32" (section 4) and refers in particular to the
"case of condominiums or row houses" (section
14). Counsel for the respondent frankly admitted
that this Bulletin is an obstacle to his arguments
and strove unsuccessfully to persuade the Court
that the legislation and regulations at issue so
clearly supported his interpretation that there was
no need to have recourse to the Bulletin.
Question two: whether purpose of building
residential
Counsel for the respondent argued, with the
support of dictionary definitions, that a residential
building "is a place where someone habitually
resides" and which "is used to accommodate its
occupants more or less permanently, as opposed to
a place lived in for short periods". He also relied
on the expression "logements autonomes" used in
paragraph (a) of Class 31, the equivalent of which
in the English version is "self-contained domestic
establishment", which is itself defined in subsec
tion 248(1) of the Act as meaning "dwelling
house, apartment or other similar place of resi
dence in which place a person as a general rule
sleeps and eats". The problem is that the Act has
defined "self-contained domestic establishment",
but in French defined not "logement autonome",
which is the expression used in Class 31, but
"établissement domestique autonome", so that it
is not clear that the intention in Class 31 was to
refer to the same situation as that referred to in
subsection 248(1). In any case, I consider that the
French and English wordings of Class 31 lead to
the same interpretation.
Counsel for the respondent also tried to show
that in the case at bar the appellant submitted no
evidence that the units were occupied by persons
who were making them their habitual place of
residence, rather than temporary occupants.
I note at the outset that the requirement of
"logements autonomes" is an objective one in the
case at bar, determined first in the CMHC certifi
cate and second in the plans and specifications for
the building approved by the CMHC. As a ques
tion of fact, therefore, this requirement precedes
construction of the building. Once the plans and
specifications have been approved and the certifi
cate issued by the CMHC, the building qualifies of
itself and I do not think that, in the absence of any
allegation of bad faith or deceit, the Court can
impose on the taxpayer the burden of establishing
that the intended use of the building is not or is no
longer in fact what it was on paper. In the case at
bar, the Department had the burden of showing
that the certification was wrongly issued or the
intended use of the building had been changed. It
did not discharge that burden. I note from consult
ing the Interpretation Bulletin, since there is a
doubt, that it is in fact the "intended use of the
units" (my emphasis) which makes it possible for a
building "[t]o qualify as residential" (section 7),
which confirms my interpretation of the burden of
proof in the event that a building ceases to fall
within Class 31, as mentioned in section 11 of the
bulletin.
The Interpretation Bulletin is also instructive as
to the meaning to be given to the word "residen-
tial". Under section 7 a building will be "residen-
tial" if it is intended "to provide, on a more or less
permanent basis, the place of residence or abode of
its occupants". The idea of "on a more or less
permanent basis", while it may be a barrier for
example to the occupants perpetually coming and
going, does not rule out the possibility, as in the
case at bar, of more or less long-term rental
depending on the market and on chance. I also
note that in sections 11 and 12 "residential" is
contrasted with "commercial use", which leads me
to think that what the Department is primarily
trying to avoid is units being eventually used for
commercial purposes that would be inconsistent
with residential occupancy of the premises.
Clause 9.2.3 of the declaration of co-ownership
states that "the business of room rental is abso
lutely prohibited in any part used for commercial
or professional purposes, such as, but not limited
to, shops or offices". In the absence of evidence by
the Department that these clauses have been
amended — I note that under article 441m of the
Civil Code of Lower Canada, any change to the
declaration of co-ownership must be notarized and
registered, and under article 442h, the intended
use of the building can only be changed by unani
mous vote of the coproprietors — they represent in
my opinion a formal statement of the residential
rather than commercial use to which the building
is to be put. It was further in evidence that the
appellant has never paid municipal business taxes
on his fraction, which was taxed as a "dwelling".
Disposition of case
For these reasons I would allow the appeal,
reverse the trial judgment and invalidate the notice
of reassessment of September 16, 1983, 1 ° the
whole with costs against the respondent at trial
and on appeal.
HUGESSEN J.A.: I concur.
DESJARDINS J.A.: I concur.
10 The conclusions sought in the declaration refer, apparently
by error, to a notice of October 6, 1983.
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.