Chemainus Gardens RV Resort Ltd. v. British Columbia

2020 BCSC 478 Chemainus Gardens RV Resort Ltd. v. British Columbia

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: Chemainus Gardens RV Resort Ltd. v. British Columbia, 2020 BCSC 478 Date: 20200331 Docket: S185408 Registry: Victoria Between: Chemainus Gardens RV Resort Ltd. Petitioner And: Her Majesty the Queen in Right of the Province of British Columbia as Represented by the Attorney General Respondent Before: The Honourable Mr. Justice Johnston Reasons for Judgment Counsel for the Petitioner: J. Rachert Counsel for the Respondent: J. Dickieson S. Kay Place and Dates of Hearing: Victoria, B.C. January 16, 2020 February 3, 2020 Place and Date of Judgment: Victoria, B.C. March 31, 2020 [1] Chemainus Gardens RV Resort Ltd. ("Chemainus Gardens") petitions the Court seeking an order reversing or vacating an assessment of provincial sales tax ("PST") levied under the Provincial Sales Tax Act, S.B.C. 2012, c. 35 (the "Act") by the respondent British Columbia through the Ministry of Finance. The tax was assessed following an audit of Chemainus Gardens' operations between January 1, 2014 and July 31, 2017. This is a statutory appeal of that assessment by way of petition in accordance with s. 212 of the Act.

BACKGROUND [2] The tax relates to Park Model trailers, which appear similar to manufactured homes, but are originally equipped with wheels on which they can be towed. Chemainus Gardens purchased 39 of these units and resold them to customers who entered into agreements whereby they and their newly acquired Park Model trailers occupied sites or pads on property controlled by Chemainus Gardens. [3] Chemainus Gardens manages a residential community in Chemainus, B.C. on land it leases from a related corporation. [4] Chemainus Gardens purchases Park Model trailers from a company called Amco Homes Ltd. ("Amco"). Each trailer is delivered and placed on a gravel pad on Chemainus Gardens' leased property. Chemainus Gardens then sells each trailer to people who enter into an agreement with it in order to occupy the gravel pad. [5] When Chemainus Gardens buys a Park Model trailer from Amco, it does not pay PST. Instead, it declares that Chemainus Gardens is acquiring the Park Model trailer for the purpose of resale. The purchase agreements between Chemainus Gardens and Amco list Chemainus Gardens as the registrant for PST purposes and provide Chemainus Garden's PST registration number. Both parties to these transactions acted under the belief that Chemainus Gardens was exempt from sales tax by operation of s. 37(3) of the Act, set out below. [6] When Chemainus Gardens takes delivery of a

Park Model trailer, it has the trailer placed on a gravel pad or site and hooked up to electrical, water and sewage disposal services. [7] The Park Model trailers have material applied between the trailer and the ground, referred to as skirting, which conceals the water and sewer connections. The trailers are also set on supports or piers built of concrete blocks and lumber. Many, if not most of the Park Model trailers have stairs and decks built around the trailers. [8] A customer wishing to buy a Park Model trailer and reside at the Chemainus Gardens community enters into two agreements. The first is a sales agreement called "Park Model Purchase Agreement." This contract is in a standard form, and provides that Chemainus Gardens will order, sell, transfer and deliver to the buyer a described Park Model trailer to be located at a site identified by a number in the Chemainus Gardens community. In return for this, the buyer agrees to pay to Chemainus Gardens the purchase price stated in the contract, plus GST of 5% and PST of 7%. [9] Mr. Wansbrough, who swore an affidavit on behalf of Chemainus Gardens, describes himself as a project accountant employed by a different company, who does bookkeeping and management services for Chemainus Gardens. Mr. Wansbrough was given the task of representing Chemainus Gardens with respect to the audit that produced the assessment at the root of

this petition. Mr. Wansbrough has sworn that in a period covered by the audit (November 2015 to July 2017), Chemainus sold Park Model trailers for prices between approximately $40,000 and approximately $410,000. [10] The contract of sale goes on to provide that the buyer will also pay to Chemainus Gardens monthly "pad rent" in a stated amount commencing "upon completion of all services and construction." [11] The second agreement is also in a standard form and is titled "RV Site License - Site # ____." This document provides for payment it calls a monthly license fee, plus Harmonized Sales Tax, payable in advance. It provides for additional payments for "[s]ite electrical consumption and other utilities such as gas and cable." One provision of the license provides: The License constitutes a license only for the occupation of the Site by the specified RV, and is not a Bailment Agreement. The Company does not, in any way, take possession of, or undertake any duty to take care of the licensed RV. The Occupant acknowledges that he is a licensee with respect to any facilities assigned to the Occupant and is deemed to have willingly assumed without restriction, all risks arising out of the Occupants use of the Site and the Company's common facilities. [12] In his affidavit, Mr. Wansbrough swore: 9. Chemainus leases (the "Lease") Sites to individuals (the "Renters"). Attached to this

affidavit as Exhibit 1 is a sample of a typical Lease. [13] Exhibit 1 of Mr. Wansbrough's affidavit is an "RV Site License" as described above, which relates to site #104. This particular license is in the name of a Mr. Alexander as licensee/occupant. Attached to the site license is a six-page document entitled "Manufactured Home Site Tenancy Agreement," a standard form contract apparently created by the British Columbia Residential Tenancy Branch. The example Manufactured Home Site Tenancy Agreement exhibited to the affidavit relates to site #159, and is in the name of a Mr. Staniforth, who has signed as a tenant. The lease in turn refers to an attached addendum of eleven pages, which is not part of the exhibit. The tenancy agreement states that it is subject to the Manufactured Home Park Tenancy Act, S.B.C. 2002, c. 27. [14] Mr. Alexander's site license provides for termination on January 31, 2017. Mr. Staniforth's tenancy agreement states that it is a tenancy with no end date. However, both landlord and tenant have initialled boxes in the tenancy agreement that are only applicable to fixed term tenancies, presumably in error. [15] It is not at all clear whether every site is subject to both an RV Site License and a Manufactured Home Site Tenancy Agreement, or whether Mr. Alexander has only a site license and Mr. Staniforth only a lease. [16] The parties disagree over the way

in which the Park Model trailers become located at the Chemainus Gardens site. Mr. Wansbrough swears that the Park Model trailers are not attached to the ground on which they sit, that there may be concrete blocks between the Park Model trailers and the pad on which they are located "to ensure the [Park Model trailer] is on a flat surface." If this is intended to deny that the Park Model trailers have become affixed to the sites they occupy, it is directly contrary to the position taken by the representative Chemainus Gardens appointed to appeal the tax assessment to the Minister, referred to in more detail below. Chemainus Gardens says the Park Model trailers are plugged into electrical power through a 240 volt plug in, and are connected by Chemainus Gardens to water and sewer systems installed at the property. [17] Photographs exhibited to an affidavit show what is described as a typical Park Model trailer. It has wooden stairs and decking next to the Park Model trailer, and skirting around the bottom. Photographs taken underneath the trailer show pipes running from the bottom of the Park Model trailer to connections emerging from the ground beneath, as well as piers built up from concrete blocks and lumber, on which the Park Model trailer is set.

LEGAL FRAMEWORK [18] The taxes in dispute are, according to the respondent, made payable by the Act, relevant sections of which provide: Definitions 1. In this Act: "purchaser" means the following: (a) in relation to tangible personal property, a person who acquires tangible personal property at a sale (i) for the person's own use or consumption, (ii) for use or consumption by another person at the expense of the person acquiring the property, (iii) for use or consumption by a principal for whom the person acquiring the property acts as agent, or (iv) for use or consumption by another person at the expense of a principal for whom the person acquiring the property acts as agent; "sale" includes the following: (e) a transfer, conditional or otherwise, of title to or possession of tangible personal property under a contract; (f) a delivery of tangible personal property at a price or other consideration; but does not include the following: (l) the provision of tangible personal property by a contractor for the purposes of fulfilling a contract under which the contractor is required to supply and affix, or install, affixed machinery or improvements to real property; "tangible personal property" means the following: (a) personal property that can be seen, weighed, measured, felt or touched, or that is in any other way perceptible to the senses, and includes natural or manufactured

gas; (b) electricity; (c) heat; (d) affixed machinery; (e) an improvement to real property or part of an improvement to real property that is removed from the site at which it is affixed or installed, while it is removed from that site; "tax", in relation to tax under this Act, includes, except in section 199 [assessment if amount not paid or remitted or if excess deduction or refund], (a) an amount a person must pay to the government under section 187 (2) [certificate required for bulk transaction], and (b) an amount for which a person is personally liable to the government under section 222 (4) [responsibility of person having control of property]; "use", (a) in relation to tangible personal property, includes the following: (viii) the consumption, employment or utilization of tangible personal property for the purposes of fulfilling a contract for the supply and installation of affixed machinery or improvements to real property; Tax on purchase 37 (1) A purchaser who purchases tangible personal property at a sale in British Columbia must pay to the government tax at the applicable rate under section 34. (3) If a collector sells tangible personal property at a sale in British Columbia to a person who alleges that the tangible personal property is being purchased for resale, the person must nevertheless pay tax under subsection (1) as if the person were a purchaser and the

collector must nevertheless levy and collect the tax under subsection (1) unless the collector obtains, at or before the time the tax is payable, (a) that person's registration number, or (b) if that person does not have a registration number, a declaration in a form acceptable to the director from that person. Contractor exempt from tax under section 37 or 49 79 (1) A contractor is exempt from tax imposed under section 37 [tax on purchase] in relation to tangible personal property if (a) the contractor, for the purposes of fulfilling a contract under which the contractor is required to supply and affix, or install, affixed machinery or improvements to real property situated in British Columbia, purchases the tangible personal property at a sale in British Columbia, (b) under the terms of the contract, the tangible personal property will be used so that it ceases to be personal property at common law, (c) there is an agreement between the contractor and the person with whom the contractor has entered into the contract that (i) specifically states that the person is liable for tax imposed under section 80, and (ii) sets out the purchase price of the tangible personal property referred to in paragraph (a) that is subject to tax imposed under section 80, and (d) there is written evidence of the agreement referred to in paragraph (c). Tax on tangible personal property used to

improve real property if contractor exempt 80 (1) This section applies to a person in relation to tangible personal property if (a) the person has entered into the contract referred to in section 79 (1) (a) or (2) (a) with a contractor in relation to the tangible personal property, and (b) the contractor is exempt under section 79 from tax imposed under section 37 [tax on purchase] or 49 [tax if tangible personal property brought into British Columbia for use] in relation to the tangible personal property. (2) A person to whom this section applies must pay to the government tax on the purchase price of the tangible personal property at the applicable rate under section 34. (3) If tax is paid under this section in respect of tangible personal property, then no tax is payable in respect of that property under section 37 or 49. 212 (1) A decision of the minister under section 211 may be appealed to the Supreme Court by way of a petition proceeding. (2) The Supreme Court Civil Rules relating to petition proceedings apply to appeals under this section, but Rule 18-3 of those rules does not apply. (3) A petition must be filed in the court registry within 90 days after the date on the minister's notice of decision. (4) In the petition filed under subsection (3), the government must be designated "Her Majesty the Queen in right of the Province of British Columbia". (5) Within 14 days

after the filing of the petition under subsection (3), the petition must be served on the government in accordance with section 8 of the Crown Proceeding Act. (6) An appeal under this section is a new hearing that is not limited to the evidence and issues that were before the minister. (7) The court may (a) dismiss the appeal, (b) allow the appeal, (c) vary the decision from which the appeal is made, or (d) refer the decision back to the director for reconsideration. (8) An appeal lies from a decision of the court to the Court of Appeal with leave of a justice of the Court of Appeal. [19] Chemainus Gardens maintains that it purchased each Park Model trailer for the purpose of resale, that on reselling each it collected and remitted sales tax as required, and that the tax assessment under appeal is wrong. Specifically, Chemainus Gardens argues that the Minister erred by finding that Chemainus Gardens purchased the Park Model trailers "as a developer for installation to improve real property so that the [Park Model trailers] lost [their] character as tangible property." Chemainus Gardens says in the alternative that if the Minister is correct that each Park Model trailer lost its character as tangible personal property when it was set up on a site, that Chemainus Gardens can bring itself within ss. 79 and 80 of the Act and thereby escape liability for tax under s.

37.

ANALYSIS Director's and Minister's Assumptions and Findings [20] The audit proceeded on the basis of facts and assumptions stated in paragraphs 16(a) to 16(ll) in the response to petition, as confirmed by the responsible auditor, Mr. Duncan on behalf of the Director of the Ministry of Finance. These facts and assumptions led to the assessment of $230,100.08 for taxes and interest as shown in a notice of assessment dated November 2, 2017. [21] Some of Mr. Duncan's assumptions or findings of fact included that Chemainus Gardens leased the land on which the Park Model trailers were set and that Chemainus Gardens in turn leased sites to its customers. Mr. Duncan assumed or found as fact that Chemainus Gardens acquired the Park Model trailers for the purposes of resale, and generally would only sell Park Model trailers to those who leased sites from Chemainus Gardens (there were three exceptions noted by Mr. Duncan). [22] Chemainus Gardens appealed to the Minister. Ms. Esplen was assigned as an appeals officer to review the file and provide a recommendation to the Minister's designate who issued a decision on behalf of the Minister regarding the disposition of the appeal. Ms. Esplen deposed that it is her understanding that in accepting her recommendation, the Minister's designate (in this case, the Associate Deputy Minister) accepted most of Mr. Duncan's findings of fact and

assumptions, but differed from him by assuming or finding as fact that: · Chemainus Gardens owned the property on which the Park Model trailers were placed; · Chemainus Gardens sold Park Model trailers only to customers who leased sites; · Chemainus Gardens did not acquire the Park Model trailers for the purpose of resale, but instead purchased them for the purpose of fulfilling the "Park Model Purchase Agreements"; · the Park Model Purchase Agreements did not specifically state that the customers accepted liability for sales tax under s. 80 of the Act; but · 31 of the 39 customers who bought Park Model trailers had subsequently agreed to accept liability for the tax. [23] This last finding was based on documents provided by Chemainus Gardens for the purposes of the appeal before the Minister. [24] Both Mr. Duncan and the Associate Deputy Minister agreed that the Park Model trailers were attached to the sites by more than their own weight. [25] The part played by the Minister's assumptions in an assessment appeal was discussed in Northland Properties Corporation v. British Columbia, 2010 BCCA 177 [Northland], at paras. 21-22, and 24: [21] Returning to the proper approach in an assessment appeal, it is important to recall that, at the outset, the responsible Minister assesses the tax, then communicates that assessment, and the assumptions on which it is based, to the taxpayer.

The need for the Minister to make assumptions emerged because, in a self-assessment system, the taxpayer generally has much greater knowledge of his or her affairs than the taxing authority. The courts responded to this imbalance by permitting the taxing authority to make assumptions of fact, on the basis of which it may assess the taxpayer accordingly: Bayridge Estates Ltd. v. M.N.R. (1959), 59 D.T.C. 1098 (Ex. Ct.) at 1101, aff'd in Hickman [Hickman Motors Ltd. v. Canada, [1997] 2 S.C.R. 336]. The corollary to this power is the principle that, on judicial review, the taxpayer has the initial burden to rebut the Minister's assumptions: Johnston [Johnston v. M.N.R., [1948] S.C.R. 486]; Kennedy v. M.N.R. (1973), 73 D.T.C. 5359 (F.C.A.) at 5361, aff'd in Hickman. [22] At the same time, the Minister's power to assume is not unbounded: The assumptions must be those actually made at the time the assessment took place, and they must be clearly communicated to the taxpayer: see Holm v. The Queen (2002), 57 D.T.C. 755 (T.C.C.) at para. 17, where the jurisprudence is canvassed. In a federal tax appeal, the assumptions are specifically pleaded; in a less formal procedure, as that under the Act, they may be more difficult to identify. In such circumstances, it lies for the judge to decide which assumptions were properly stated and communicated. Assumptions neither stated nor communicated

have no effect: Pollock v. H.M.T.Q (1993), 94 D.T.C. 6050 (F.C.A.) at 6053. [24] At the hearing of the appeal, the taxpayer has the initial legal burden of proving, on a balance of probabilities, that the stated and communicated assumptions, on which the assessment is based, are wrong: Anderson [Anderson Logging Company v. The King (1924), [1925] S.C.R. 45]; Johnston; Pillsbury [M.N.R. v. Pillsbury Holdings Ltd. (1964), 64 D.T.C. 5184 (Ex. Ct.)]; Hickman; Placer Dome [Placer Dome Canada Ltd. v. Ontario (Minister of Finance), 2006 SCC 20]. [Emphasis in original.] [26] The Minister's decision under appeal here is dated September 14, 2018. It recites that the audit and ultimate assessment appealed to the Minister " determined that Chemainus was not paying or self-assessing tax on materials it used to fulfill contracts for improvements to real property." It goes on to state "Chemainus appeals the portion of the assessment relating to tax not paid on park model homes installed in real property contracts." [27] This phrase "real property contracts" is used three times in the Minister's decision; the phrase "real property improvement contracts" is used twice. What is meant by the phrases is not defined or explained in the decision, nor in the affidavit of Ms. Esplen, whose recommendation formed the basis of the decision of the Minister's designate which is appealed to this Court. [28]

The Minister's assumption, or finding, that the Park Model trailers were placed on property owned by Chemainus Gardens has been rebutted by the affidavit evidence of Mr. Wansbrough that Chemainus Gardens leases the land from a related corporation, that it leases sites that are not delineated by strata property lines to individuals, and that it does not sell land to these individuals, whom he describes as "Renters." [29] That in turn calls into question the Minister's assumption, or finding of fact communicated within the decision letter, that the Park Model homes are involved in "real property contracts" or "real property improvement contracts." [30] The decision refers several times to "TPP", an acronym standing for "tangible personal property" which is defined in the Act to include personal property that can be seen, weighed, measured, felt or touched, or that is in any other way perceptible to the senses. The Minister's decision goes on to state: Under the Act, an uninstalled park model home is TPP. Once a park model home is installed on a pad and connected to sewage and water, for the purposes of the Act, it generally becomes an improvement to real property. The Act imposes tax on sales of TPP unless an exemption applies. The Act does not impose tax on improvements to real property. It generally imposes tax on the contractor, the person who uses TPP to fulfill contracts for

the supply and installation of improvements to real property. Under the Act, a contractor is considered to be the user of any goods purchased to fulfill a real property contract. However, according to section 79 of the Act, a contractor is exempt from paying tax on its purchase of TPP acquired for use in a real property contract if an agreement is in place prior to the customer acquiring the goods that meets the conditions set out in section 79. One of the conditions is that there must be an agreement between the contractor and its customer specifically stating that the customer accepts liability for the tax imposed under section 80 of the Act, as well setting out the purchase price of the TPP subject to that tax. The other condition is that there must be written evidence of this agreement. Chemainus' sales agreement do not contain wording sufficient to meet the requirements of written evidence of an agreement under section 79. In order to provide written evidence of a specific agreement under section 79, there must be a written agreement or a written statement verifying an agreement. The written evidence must include a clear statement that the customer agrees to pay the tax on the goods under section 80, or that the customer agrees to the contractor transferring the responsibility for paying the tax on the goods to them. A customer simply agreeing to pay any tax imposed by the

government does not satisfy the requirements of section 79. Have the Park Model Trailers become affixed to the land on which they sit? [31] In its petition, Chemainus Gardens has argued that the Park Model trailers remain tangible personal property and were not affixed to the land, and did not otherwise become fixtures. [32] This is contrary to the position taken by the representative Chemainus Gardens appointed to communicate with the Ministry of Finance on its behalf for the assessment appeal. This representative appealed $214,470.33 of the $230,100.08 initial assessment in a letter (mis)dated January 23, 2017 (context shows it should have been dated in 2018). In the appeal letter, the representative stated: "Chemainus purchased, sold and installed on sites Park Model travel trailers." And, further on, "The trailers are subsequently affixed or installed to real property." [33] Chemainus Gardens submits on this appeal that its representative was speaking hypothetically, and that she should be taken to have said that even if the Park Model trailers had been affixed to the land, the operation of ss. 79 and 80 of the Act apply to confirm that the petitioner has correctly charged and remitted PST. [34] The representative's written submission on the assessment appeal does not lend itself to an interpretation that she was speaking hypothetically. The representative stated as fact

that the Park Model trailers have been affixed or installed to real property. [35] The Minister's incorrect finding, or assumption, that Chemainus Gardens owned the land under the Park Model trailers loses some of its significance in the face of the representative's admission. [36] Putting aside the representative's admission for a moment, the legal test for whether property is a fixture or a chattel was originally set out in Stack v. T. Eaton Co. (1902), 4 O.L.R. 335 (Div. Ct.), as confirmed in Scott v. Filipovic, 2015 BCCA 409 [Scott] at para. 18: [18] [T]his Court adopted the five principles for determining whether property is a fixture or chattel stated in Stack v. T. Eaton Co. (1902), 4 O.L.R. 335 (Div. Ct.): (1) That articles not otherwise attached to the land than by their own weight are not to be considered as part of the land, unless the circumstances are such as shew that they were intended to be part of the land. (2) That articles affixed to the land even slightly are to be considered part of the land unless the circumstances are such as to shew that they were intended to continue chattels. (3) That the circumstances necessary to be shewn to alter the prima facie character of the articles are circumstances which shew the degree of annexation and object of such annexation, which are patent to all to see. (4) That the intention of the person affixing the article to the

soil is material only so far as it can be presumed from the degree and object of the annexation. (5) That, even in the case of tenants' fixtures put in for the purposes of trade, they form part of the freehold, with the right, however, to the tenant, as between him and his landlord, to bring them back to the state of chattels again by severing them from the soil, and that they pass by a conveyance of the land as part of it, subject to this right of the tenant. [37] The Park Model trailers here are attached to the land by more than their weight and "affixed to the land even slightly" by virtue of their water and sewer hook-ups. The skirting, decking, and stairs surrounding the Park Model trailers add some weight to the notion that the water and sewer connections operate to affix the Park Model trailers to the land. Prior to attaching the skirting, decking and stairs surrounding the Park Model trailers, the degree of annexation was slight. However, the degree of annexation became more significant upon the installation of the skirting, decking, and stairs surrounding each Park Model trailer. The purpose of annexation was to better enjoy the use of the trailers, not to increase enjoyment of, or improve, the land on which they sit. Circumstances that clearly show the Park Model trailers are intended to continue to be chattels include that the Park Model trailers are sold for

significant prices to buyers, yet are sitting on a site to which the buyer has no more than a license or perhaps lease right to occupy. It is difficult to accept that the 39 owners of these Park Model trailers agreed to pay significant sums for their trailers expecting that their investments would become fixed to and part of the land on which they sit, because of servicing connections that are relatively easily undone. [38] But chattels can become affixed to land, becoming part of the land, and subsequently severed from the land, resuming their status as chattels. This was the case of blueberry bushes issue in Scott, which had been planted by a tenant on leased land, and which the Court of Appeal found had become fixtures or affixed to land for the duration of the lease of the land, but which could be removed or detached from the land at the end of the lease. The Court said at paras. 26-28: [26] Removal of the plants at the end of the lease may return them to their status as chattels. It does not mean that they were not fixtures prior to that time. In my view, the plants clearly were affixed to the land. The purpose or object of the annexation was to grow the plants so they could yield marketable crops of blueberries. [27] I agree with the appellant that the fact the plants were to be removed at the end of the lease does not inform their characterization as fixtures or chattels

during the term of the lease. The parties agree that the appellant was concerned with the aesthetics of his land. It is apparent that he did not want an unfarmed field of blueberry plants; it was to be returned to Timothy grass. [28] In summary, although I do not agree that the blueberry plants were chattels, in this case, the tenant had the right to remove the blueberry plants at the end of the lease. The appellant prevented their removal, but that is not determinative of this appeal. [39] In my view, the circumstances set out in paragraph 37 above, favoring the Park Model trailers retaining their status as chattels or tangible personal property under the Act outweigh any circumstances that would favor their becoming affixed to the licensed or leased pads or sites on which they are placed. This conclusion is in keeping with the weight of authority in this province as set out in Atlin Air Ltd. v. Milikovic, [1976] W.W.R. 329 (B.C.S.C.) and Burlington Administration Group Ltd. v. Nikkel et al., (1979), 17 B.C.L.R. 229. [40] The admission made by Chemainus Garden's representative that the trailers were affixed or installed to real property is not determinative as to their status as chattels or tangible personal property as the degree of annexation to the land is just one of the factors to be considered. Additionally, s. 212(6) of the Act provides that this appeal proceeds as "a

new hearing that is not limited to the evidence and issues that were before the minister,". [41] The Minister's assumption that the contracts by which Chemainus Gardens sold Park Model trailers and leased or licensed the sites on which they were placed were "real property contracts" or "real property improvement contracts" becomes less defensible, for reasons more fully stated in paragraphs 49 and 50, below. [42] The Minister's position is different than the position taken by a manager of the Consumer Taxation Programs Branch of the Ministry of Finance in a letter to Chemainus Gardens dated April 3, 2013, which I note was prior to the assessment period at issue on this appeal. In that letter, the manager said that if Chemainus Gardens did not sell land, a sale by it of a Park Model trailer would be a sale of tangible personal property on which PST would be payable on the purchase price. Mr. Wansbrough swears that as a result of the April 2013 letter, Chemainus Gardens has governed itself accordingly, charging PST when it sells trailers to buyers, and remitting that PST to the Ministry of Finance. Sections 37, 79 and 80 [43] The position now taken by the Minister in the decision under appeal before this Court is that when Chemainus Gardens buys a Park Model trailer from Amco, it does so as a contractor, and can escape paying PST pursuant to s. 37(1) only if it meets the

requirements of s. 79, which I repeat here for convenience: 79 (1) A contractor is exempt from tax imposed under section 37 [tax on purchase] in relation to tangible personal property if (a) the contractor, for the purposes of fulfilling a contract under which the contractor is required to supply and affix, or install, affixed machinery or improvements to real property situated in British Columbia, purchases the tangible personal property at a sale in British Columbia, (b) under the terms of the contract, the tangible personal property will be used so that it ceases to be personal property at common law, (c) there is an agreement between the contractor and the person with whom the contractor has entered into the contract that (i) specifically states that the person is liable for tax imposed under section 80, and (ii) sets out the purchase price of the tangible personal property referred to in paragraph (a) that is subject to tax imposed under section 80, and (d) there is written evidence of the agreement referred to in paragraph (c). [44] The Minister explains in its written submissions why the fact that the Park Model trailers ceased to be tangible personal property, as I have found, leads to the conclusion that Chemainus Gardens must pay s. 37 tax. I will outline the framework within the Act that the Minister relies upon, underlining the key words for emphasis. [45] In order

for a s. 37 tax to apply, the Minister relies upon s. 37(1): 37 (1) A purchaser who purchases tangible personal property at a sale in British Columbia must pay to the government tax at the applicable rate under section 34. [46] The Minister argues that the definition of purchaser is fulfilled by reference to "use" within section 1(a)(i) of that definition: "purchaser" means the following: (a) in relation to tangible personal property, a person who acquires tangible personal property at a sale (i) for the person's own use or consumption, [47] In establishing "use", the Minister relies upon the definition found in s. 1(a)(viii), reproduced here: "use", (a) in relation to tangible personal property, includes the following: (viii) the consumption, employment or utilization of tangible personal property for the purposes of fulfilling a contract for the supply and installation of affixed machinery or improvements to real property; [48] According to the Minister, the purchase of the Model Park trailers was made for the purpose of fulfilling a contract for the supply and installation of improvements to real property. The contracts in question are, according to the Minister, the Park Model Purchase Agreements. The Minister says it follows that when Chemainus Gardens bought each Park Model trailer from Amco, that transaction was not exempt from PST under s. 37(3) because the purchase was

not for the purpose of resale, it was for the purpose of fulfilling the Park Model Purchase Agreements. [49] The Park Model Purchase Agreements oblige Chemainus Gardens to " order, sell, transfer and deliver to the buyer the following Park Model (the goods) [l]ocated at site # ". The agreement does not oblige Chemainus Gardens to affix or install an improvement to real property. Nor do the surrounding circumstances, in which the Park Model trailers are set up on land owned by a non-contracting party, and "affixed even slightly" in the language of Stack, suggest that Chemainus Gardens is contractually bound to affix or install the Park Model trailers as improvements to real property within the meaning of the words comprising the definition of "use," as relied upon by the Minister. [50] Here the Minister's assumption that the land on which the trailers sit is owned by Chemainus Gardens becomes important. It would be one thing for the Minister to assume there is a contract for the supply and installation of improvements to Chemainus Garden's real property. However, it is another thing entirely to assume there is a contract for the supply and installation of improvements to real property owned by a third party. [51] The Minister's argument that Chemainus Gardens is required to pay a s. 37 tax fails. [52] In the alternative, if the Minister is correct and a s. 37 tax applies under

s. 37(1) due to the above definitions being met, the question becomes whether Chemainus Gardens is exempt from the tax levied under s. 37 of the Act because, as the Minister maintains, when Chemainus Gardens buys Park Model trailers from Amco it does so as a "contractor." Assuming Chemainus Gardens would be a "contractor" for the purposes of s. 79, the following four requirements must be established to qualify Chemainus Gardens for an exemption under s. 79: 79 (1) A contractor is exempt from tax imposed under section 37 [tax on purchase] in relation to tangible personal property if (a) the contractor, for the purposes of fulfilling a contract under which the contractor is required to supply and affix, or install, affixed machinery or improvements to real property situated in British Columbia, purchases the tangible personal property at a sale in British Columbia, (b) under the terms of the contract, the tangible personal property will be used so that it ceases to be personal property at common law, (c) there is an agreement between the contractor and the person with whom the contractor has entered into the contract that (i) specifically states that the person is liable for tax imposed under section 80, and (ii) sets out the purchase price of the tangible personal property referred to in paragraph (a) that is subject to tax imposed under section 80, and (d) there is written

evidence of the agreement referred to in paragraph (c). [53] Assuming the above definition of "use" in s. 1(a)(viii) is met, the requirement in s. 79(1)(a) is also met as the phrasing with relation to fulfilling the contract in this definition of "use" is nearly identical to the phrasing in subsection 79(1)(a). [54] The requirement in s. 79(1)(b) is met, as I have found the tangible personal property of the Park Model trailers is being used in such a way (through the decking, stairs, skirting and water and sewer connections), that it ceases to be personal property at common law and has rather become part of the land. [55] Thus, the only requirements that Chemainus Gardens must show are met are those under s. 79(1)(c) and s. 79(1)(d): that there is an agreement, of which there is written evidence, between Chemainus Gardens and each customer that specifically states that the customer is "liable for tax imposed under section 80", and the agreement must set out the purchase price of each Park Model trailer. [56] Chemainus Gardens says that in each case, the Park Model Purchase Agreement through which it sells, and its customer buys, the Park Model trailers, meets the requirements of s. 79(1)(c) and s. 79(1)(d). Chemainus Gardens says that each Park Model Purchase Agreement clearly sets out the price of each trailer and amount of PST payable. Chemainus Gardens argues that each Park

Model Purchase Agreement clearly states the buyer is liable for 7% PST and in each case its customer agrees to pay, and does pay, the 7% PST that Chemainus Gardens remits to the Minister. [57] The Minister argues that this is not enough, because the Park Model Purchase Agreements do not specifically refer to s. 80, and the exemption under s. 79 requires that the agreements state that the buyers are "liable for tax imposed under section 80." [58] The Minister's argument refers to the sales tax as either a "s. 37 tax" or a "s. 80 tax", an approach which does little to clarify matters. It is the same tax referred to, with the difference being the basis on which it is paid. This in turn is dependent on when the tax attaches to the transaction: either when the Park Model trailer transfers from Amco to Chemainus Gardens, or when the Park Model trailer transfers from Chemainus Gardens to the ultimate customer who occupies the Park Model trailer on a site licensed or leased from Chemainus Gardens. [59] The Minister says that the requirement for the Park Model Purchase Agreements to contain language to the effect that buyers acknowledge they are liable for "tax imposed under section 80" is more than mere formality. The Minister points out that those who have purchased Park Model trailers from Chemainus Gardens, and have paid PST on their purchases, have four years, pursuant to s. 166 of

the Act, from when they paid PST to apply to the Minister for a refund, payable under s. 152 of the Act, which states: 152 (1) If the director is satisfied that (a) a person has paid an amount as tax under this Act in circumstances in which there was no legal obligation to pay the amount as tax, and (b) the person has not been paid a refund or allowed a credit under section 146 in respect of the amount, the director must refund to that person the amount paid as tax. (2) If the director is satisfied that a collector has remitted to the government an amount in circumstances in which the collector (a) was not required to levy and collect the amount under this Act, and (b) did not collect the amount under this Act, the director must refund that amount to the collector. (3) If the director is satisfied that (a) a collector has remitted an amount as tax under this Act, and (b) the person liable to pay the tax has paid the tax directly to the government, the director must refund that amount to the collector. [60] This argument has no merit: the customers buying Park Model trailers from Chemainus Gardens had legal obligations to pay PST. [61] I find that in the alternative, all four requirements under s. 79 are met and accordingly Chemainus Garden's customers are required to pay the PST under s.

80. The customers have already paid the s. 37 or s. 80 tax to Chemainus Gardens. [62] Chemainus Gardens has collected and remitted PST on each of the Park Model trailers it has sold to its customers, except for $5,250 it agrees it owes for tax it failed to remit as required. Subject to that concession, the Minister has received the full amount of PST to which it is entitled on the sales of the Park Model trailers. [63] Subject to that, the appeal is allowed. "The Honourable Mr. Justice Johnston"