High-Crest v. R. - TCC: Nova Scotia funded seniors home for the “purpose” of housing seniors

High-Crest v. R. - TCC:  Nova Scotia funded seniors home for the “purpose” of housing seniors


High-Crest Enterprises Limited v. The Queen (September 30, 2015 – 2015 TCC 230, Owen J.).

Précis:   This case turns on a very narrow point.  High-Crest Enterprises Limited (“High-Crest”) built extensions to its senior facilities using support from the province of Nova Scotia.  It was agreed that this was a self-supply and therefore subject to HST.  The dispute was whether the HST was computed in accordance with section 191 or 191.1 of the Excise Tax Act (the “ETA”).  If the former the HST was based on the fair market value of the extensions;  if the latter the HST was based on the greater of fair market value and cost.  The parties agreed that the difference between the two positions was $350,000 in the former case and $646,304 in the latter.

The issue was whether the province extended the support “for the purpose of making residential units in the complex available to [seniors]” within the meaning of section 191.1 of the ETA.  The Court held that on the evidence that was clearly Nova Scotia’s intended purpose and dismissed the appeal with costs.

Decision:  While the facts of this case are involved and the analysis lengthy and cogent, the decision boils down to four pithy concluding paragraphs:

[94]        To summarize, the purpose of the arrangements mandated by the Department is clear. The government of Nova Scotia as represented by the Department needed new long‑term care facilities and chose to partner with the private sector to bring that objective to fruition. The means of achieving the desired objective was to provide for successful bidders a guaranteed level of funding, which is payable under the terms of a service contract. This means does not alter the objective that was sought to be achieved by the government in unilaterally establishing the arrangements with successful bidders.

[95]         The fact that High-Crest was subject to an annual licensing requirement does not alter the purpose of the funding provided by the Department to High-Crest. The annual licensing requirement is simply a mechanism used to ensure ongoing compliance with the very detailed operating parameters imposed by the Department in the RFP, the Development Agreement and the Service Agreement.

[96]        As well, the fact that the Development Agreement did not itself provide for funding of the Addition is not indicative of the purpose of the payments under the Service Agreement. The RFP and the Development Agreement each contemplated the execution of the Service Agreement, and section 4.2 of the Development Agreement described the funding conditions. Collectively, these three documents and their many attachments reflect the means by which the Department achieved its objective of building new long-term care facilities in Nova Scotia, and these means included significant payments of money by the Department to High-Crest.

[97]        For the foregoing reasons, the appeal of High-Crest is dismissed with costs to the Respondent.

A result that would seem very hard to fault.