S.C.A. No. 02780
NOVA SCOTIA COURT OF APPEAL
Clarke, C.J.N.S., Freeman and Pugsley, JJ.A.
Cite as: Nova Scotia (Attorney General) v. Oxner, 1993 NSCA 82
B E T W E E N:
THE ATTORNEY GENERAL OF NOVA SCOTIA ) John D. Wood
) for appellant
appellant )
)
)
- and - )
)
GREGORY E. OXNER ) Norman B. Hill
) for respondent
respondent )
)
) Appeal Heard:
) April 13, l993
)
)
) Judgment Delivered:
) April 22, l993
)
)
THE COURT: Appeal dismissed from decision of Nova Scotia Tax Review Board per reasons for judgment of Freeman, J.A.; Clarke, C.J.N.S., and Pugsley, J.A., concurring.
FREEMAN, J.A.:
The respondent is a school teacher who in 1987 purported to trade in his "Mirage 30" sailboat for a $50,000 credit and ordered a new one, a "Westcoast 34", for $64,139.30 in anticipation of cruising the Caribbean with his wife and son during a year's leave of absence in 1991-92.
Upon delivery of the new boat in 1988 he paid Health Services tax of $1,413.93, ten per cent of the difference between the prices. The Provincial Tax Commission ruled the transaction was not a trade-in within the meaning of S. 10 of the Health Services Tax Act, R.S.N.S. 1989, c.198, and found him liable for tax on the full value of the new boat. He was assessed $8,182.63 representing tax, interest and penalty.
The Nova Scotia Tax Review Board reversed the ruling of the Provincial Tax Commission on appeal, finding that the transaction was a s. 10 trade-in and that Mr. Oxner had paid the correct tax. The Minister has appealed the ruling of the Board to this court.
Mr. Oxner contracted with Coastal Yachts Limited, a yacht brokerage company wholly owned by his sailing friend David Archibald, to sell the Mirage 30 and buy the Westcoast 34. Coastal took cash and a boat in trade from the buyer of the Mirage 30. When that was sold Coastal retained a $1,000 deposit against the purchase of the new boat, which it ordered from Marquis Marine Limited in British Columbia, and paid over the balance of $49,000 to Mr. Oxner. He paid out the $29,000 balance of a bank lien against the Mirage 30.
Mr. Archibald had also been general manager and a shareholder of Ocean Yacht Sales Limited of Chester, Nova Scotia. Before the Westcoast 34 was delivered he took other employment and assigned the business of Coastal Yachts to Ocean Yachts. On delivery Mr. Oxner paid the balance of the purchase price to Ocean Yachts, having previously paid some interim billings, and paid the Health Services tax.
Section 10 of the Health Services Tax Act provides:
" 10 Where tangible personal property is accepted in trade from the purchaser at the time of sale by the seller or vendor on account of the price of the property sold, the purchaser shall pay the tax on the difference between the purchase price of the property sold and the credit allowed for the tangible personal property accepted in trade on account of the purchase price."
In interpreting s. 10 of the Act the Board took into consideration the broad definition of sale in s. 2(r):
" (r) 'sale' includes a conditional sale, hire purchase and any transfer of title or possession, conditional or otherwise, including a sale on credit or where the price is payable by instalments, an exchange, barter, lease or rental, or any other contract whereby at a price or other consideration a person delivers to another tangible personal property and also includes the provision by way of promotional distribution of any tangible personal property."
After a detailed consideration of the evidence, the Review Board held:
"The Board dealt with the application of this section (s.10) in similar circumstances in reaching a decision in Nova Enterprises Ltd. and The Provincial Tax Commission H.S.T. 069 January 15, 1992. The Board concluded that the words in s. 10 'at the time of sale by the seller or vendor on account of the price of the property sold' would include a conditional sale that is a sale dependent on the sale of the used unit. The Board also concluded that the application of the law must take into account the normal practices of the industry where in many cases the ordering and subsequent sale of a new unit is dependent on the sale of a used unit.
In the present case the Board is satisfied that there was a verbal contract between the appellant (Mr. Oxner) and David Archibald that the new hull would be ordered when the used boat was sold. This took place and $1,000 of the net proceeds was held by the broker and formed part of the subsequent sale of the new boat. The manner in which this sale was completed is normal business practice in the yachting fraternity. Mr. Archibald described most sales in the good years as being dependent on the sale of the used yacht before the transaction could be finalized."
The Minister appealed the Board's decision pursuant to s. 21 of the Act, which provides:
" 21 The Minister or the appellant may appeal from the decision of the Nova Scotia Tax Review Board to the Appeal Division of the Supreme Court upon any point of law raised upon the hearing of the appeal."
The standard of review to be applied to the Nova Scotia Tax Review Board was recently stated by Mr. Justice Hallett of this court in Attorney General of Nova Scotia v. Haddad Brothers Enterprises Limited (Unreported, April 5, 1993--S.C.A. No. 02784) as follows:
"The Board is a specialized statutory tribunal; the courts recognize such tribunals to have an expertise in their field not possessed by the courts. A recent and oft quoted statement of the law on the subject of judicial review of decisions of statutory tribunals is that of Justice McLachlin, speaking for the majority, in Lester (W.W.) (1978) Ltd. v. United Association of Journeymen and Apprentices of the Plumbing and Pipefitting Industry in the United States and Canada Local 740, [1990] 3 S.C.R. 664 where she stated at p. 669:
'Courts should exercise caution and deference in reviewing the decisions of specialized administrative tribunals, such as the Labour Board in this case. This deference extends both to the determination of the facts and the interpretation of the law. Only where the evidence, viewed reasonably, is incapable of supporting a tribunal's findings of fact, or where the interpretation placed on the legislation is patently unreasonable, can the court interfere.'
" That statement was made in the context of judicial review of a decision of a statutory tribunal that was protected by a strong privative clause. The matter before us is by way of an appeal on a point of law only. The remarks relating to curial deference are clearly applicable to the latter, although the scope of appellate review on a point of law requires the Board to be correct in its interpretation of the Act."
The Review Board's appreciation of the evidence of business practices in the yachting community was an example of its expertise as a specialized tribunal.
The gist of the appellant's argument is that "the evidence in this case before the Board does not support an interpretation that there was a trade-in of Mr. Oxner's Mirage 30 on the purchase of the Westcoast 34 yacht." The appellant urged that there were two transactions, one when the Mirage 30 was sold and one when the Westcoast 34 was purchased. For a taxpayer to bring himself within the s. 10 exemption, it was argued, he had to show that a credit was allowed for the first unit against the purchase price of the new one. Because the broker turned over the cash from the transaction to Mr. Oxner, there was no credit to apply. The cash was mingled with borrowed funds and applied in partial payments against various components of the Westcoast 34 and finally for the balance owed upon delivery of the hull.
The point of law is whether, when there is a substantial delay between the trade-in and the delivery of the new unit, there can be a s. 10 exemption without a credit carried on the books of the dealer or broker and applied to the price of the new unit upon delivery. There can be no doubt that the position of a purchaser claiming a s. 10 exemption would be much improved by the existence of a credit in such a readily ascertainable form.
On the other hand, in the present uncertain business climate, the entire credit might be lost in the event of a failure of the dealer or broker during the period between the trade-in and delivery. Once a credit has been created, it does not appear to be a necessary
requirement for an exemption under s. 10 that the funds remain with the dealer. It seems reasonable that an appropriate contract may be used as a substitute for the actual possession of the funds, but if so, it should clearly establish that the positions of the parties are being preserved as of the time of sale. Stated another way, the person claiming a s. 10 exemption would have the burden of proving that a credit resulting from the trade-in has actually been applied to the purchase of the new unit when delivery has been delayed.
I would therefore conclude as a point of law that once a trade-in credit is established, s. 10 does not prescribe the form in which it is to be carried forward to be applied to the purchase price of a new unit. Whether there has been a trade-in, and whether the credit from the trade-in is actually applied to the purchase price, are therefore matters of fact for the determination of the Review Board.
Mr. Oxner's long term plan was clearly within the spirit of s. 10; his Mirage 30 was his means of acquiring a more seaworthy boat for cruising the Caribbean, and he settled on the Westcoast 34. He had paid Health Services tax when he purchased the Mirage 30 and would reasonably have considered himself liable only for additional Health Services tax for the difference in the price. The tax paid by the purchaser of the Mirage 30 together with the tax on the price difference would equal the tax payable on the new boat if there had been no trade-in. He arranged the transaction through a yacht broker in an apparent effort to comply with the provisions of s. 10. The question for the Review Board was whether Mr. Oxner strayed outside the technical requirements of s. 10.
No problem was created by the need to find a buyer before the transaction could proceed. Yachts are expensive commodities; as the Board found,it is often necessary for a purchaser to be found for a used unit before either the broker or the purchaser can make a final commitment. It seems immaterial whether the dealer or broker takes the trade-in unit into inventory or disposes of it immediately so long as the transaction generates a credit to the customer to be applied toward the purchase of the new unit. If the Westcoast 34 had been available for delivery by Coastal Yachts when the Mirage 30 was sold, there could be little doubt that the transaction was a trade-in within s. 10.
Ownership of the Mirage 30 did not pass into Coastal Yachts on the brokered sale, nor did it need to. At the bidding of Coastal Yachts Mr. Oxner signed the transfer papers in favour of the new owner. The new owner traded in a smaller sailboat, an O'Dea 25, and paid Coastal the $30,000 balance of the purchase price plus Health Services tax. Coastal Yachts took the O'Dea 25 into inventory. It was then that Mr. Oxner unconditionally committed himself to Coastal Yachts to purchase the Westcoast 34. That must be considered the time of sale. At that point the Mirage 30 had passed out of his possession. In its place he was entitled to a credit from Coastal Yachts of $30,000 for the cash payment plus the price brought by the O'Dea 25, which Coastal Yachts sold for $20,000 ten days later. (It would be immaterial if the final contractual commitment, and the time of sale, did not occur until the sale of the O'Dea 25.) A value of $50,000 for the Mirage 30 was established for tax purposes. That was "the credit allowed for the tangible personal property accepted in trade on account of the purchase price." It existed at the time of sale in the form of a credit owed Mr. Oxner by Coastal Yachts. Mr. Oxner knew with certainty that the Mirage 30 had brought $50,000, which enabled him to finalize his contract with Coastal Yachts for the purchase of the Westcoast 34. Coastal Yachts subsequently placed the order with Marquis Marine; when it did so is immaterial because Mr. Oxner's contract was with Coastal Yachts as the seller or vendor. Once the credit was established, the manner in which it was applied to the purchase of the Westcoast 30 was less relevant than the fact that it was actually so applied.
Mr. Oxner was bound by contract to pay the purchase price, and the proceeds of the sale of the Mirage 30 enabled him to do so. On the point of law raised by the Minister as appellant, it is not necessary to conclude that the price realized for the Mirage 30 lost its character as a credit within the meaning of s. 10 merely by the fact it was held by Mr. Oxner and not Coastal Yachts.
The obvious deficiencies in the bookkeeping and record keeping relating to the transaction raised questions of fact for the consideration of the Review Board. These were resolved by the finding that there was a verbal contract between Mr. Oxner and Mr. Archibald. The Review Board considered it significant that in turning the funds over to the keeping of Mr. Oxner, Coastal Yachts had retained a $1,000 deposit from the monies realized from the sale of the Mirage 30. This served as a binder requiring Mr. Oxner to complete his purchase of the Westcoast 34. It was open to the Review Board to conclude, as it obviously did, that the credit generated on the sale of the Mirage 30 was applied to the purchase price of the Westcoast 34.
Two further points of law were argued: that the transaction could not be a s. 10 trade-in because two companies were engaged, and that the Review Board misconstrued the meaning of conditional sale. There is no merit in either. The Review Board accepted Mr. Archibald's explanation that Coastal Yacht's business--including Mr. Oxner's contract--had been transferred to Ocean Yachts. The Board was not using "conditional sale" in its technical sense when it referred to a sale "dependent on the sale of the new unit." The definition of sale in s. 2 (r) is broad enough to encompass the present transaction.
After considering the evidence and the submissions of counsel I am satisfied that the Review Board committed no reversible error on a point of law. Therefore its decision should not be interfered with by this court. I would dismiss the appeal. While this was a tribunal appeal, I would order that the respondent shall have costs which I would fix at $1,000.
Freeman, J.A.
Concurred in: Clarke, C.J.N.S.
Pugsley, J.A.
S.C.A. No. 02780
NOVA SCOTIA COURT OF APPEAL
B E T W E E N:
THE ATTORNEY GENERAL OF NOVA SCOTIA ) REASONS FOR
)
- and - ) JUDGMENT BY:
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GREGORY E. OXNER ) FREEMAN, J.A.