Nova Scotia (Finance) v. Nova Scotia Teachers Union

Nova Scotia (Finance) v. Nova Scotia Teachers Union Court Court of Appeal Date 1995-03-21 Citation 1995 NSCA 37 Docket CA 110143 Judge/Registrar/Adjudicator Matthews, Kenneth M., (Honourable Justice); Freeman, Gerald B. (Honourable Justice) (CA); Roscoe, Elizabeth A. (Honourable Justice) (CA) Document Type Decision Decision Content C.A. No. 110143 NOVA SCOTIA COURT OF APPEAL Matthews, Freeman and Roscoe, JJ.A. Cite as: Nova Scotia (Finance) v. Nova Scotia Teachers Union, 1995 NSCA 37 BETWEEN: ) ) MINISTER OF FINANCE ) John D. Wood ) for the Appellant Appellant ) ) - and - ) ) NOVA SCOTIA TEACHERS UNION ) Alan J. Dickson ) for the Respondent Respondent ) ) ) ) Appeal Heard: ) February 6, 1995 ) ) ) Judgment Delivered: ) March 21, 1995 THE COURT: The appeal is allowed in part and the Board's decision is set aside as per reasons for judgment of Roscoe, J.A.; Matthews and Freeman, JJ.A., concurring. ROSCOE, J.A.: This is an appeal from a decision of the Nova Scotia Utility and Review Board which allowed an appeal from the Provincial Tax Commissioner regarding an assessment of the respondent pursuant to the Health Services Tax Act, R.S.N.S. 1989, c.198. The assessment in issue on this appeal is for tax on fees paid by the respondent to a graphic design firm in connection with a magazine produced by the respondent for its members. The magazine, called "Aviso", is produced twice yearly and distributed to every public school teacher in the province. The respondent sends copies of the magazine by courier to the union representative at each school who in turn distributes them to the individual teachers. The teachers do not pay a separate subscription fee for the magazine. The Provincial Tax Commissioner determined that the respondent should pay sales tax on graphic design services on the basis that the union is the user of the magazine and therefore it is manufacturing goods for its own use and tax is payable on the total manufactured cost. The respondent paid tax on all other purchases of materials relating to the production of the magazine, and those taxes are not at issue on this appeal. On appeal of the Commissioner's decision by the respondent, the Utility and Review Board found that the magazine was not taxable because it was included in the exemption found in s. 12(1)(z) of the Act: "12 (1) The following classes of tangible personal property are specifically exempted from the provisions of this Act: . . . (z) newspapers, however purchased, magazines and periodicals when purchased by subscription for delivery by mail;" The Board also found that the respondent was not the user or consumer of the magazines and therefore the design services were not taxable. The Board found that the teachers were the users and consumers of the magazines. The first issue on the appeal is whether the Board erred in law in proceeding with its hearing of the taxpayer's appeal beyond the period allowed by s. 20L(3) of the Act: "The Board shall hear an appeal within sixty days after the notice of appeal is filed with the Clerk." In this case the appellant filed its Notice of Appeal with the Board on April 26, 1994. The appeal was heard on July 13, 1994, seventy-eight days later. The appellant submits that as a result of not having the hearing within the prescribed time, the Board lost jurisdiction. No authority is cited for the argument. The Act is silent on the consequence of failure to hold a hearing within the sixty days, so the issue is whether the section is mandatory or directory. A similar question was dealt with by Freeman, C.C.J., as he then was, in Family and Children's Services of Lunenburg County v. E.C. (1988), 86 N.S.R.(2d) 302. In that case, the issue was whether a Family Court judge had lost jurisdiction over a case by adjourning it beyond the period allowed in s.49(1)(a) of the Children's Services Act, S.N.S. 1976, c.8 which provided: "49 (1) At a place and time fixed for the hearing of any adjournment thereof, the judge shall inquire into the subject matter of the proceedings, and may (a) adjourn the hearing from time to time for a period up to but not exceeding six months from the date the child was taken into care . . . " Justice Freeman found that there was little guidance in the statute for determining whether the provision was mandatory or directory and that the statute was ambiguous on that point. He turned to Halsbury's Laws of England for guidance and relied on passages in Volume 44, 4th edition to come to the conclusion that s.49(1)(a) of the Children's Services Act was "an innocent housekeeping provision intended to keep protection matters from becoming unduly drawn out" and that the section should be "interpreted as a procedural or directory as opposed to a mandatory provision." The references to Halsbury's that are helpful in this case are as follows: "896. Regard to consequences if statute is ambiguous. If the language of a statute is ambiguous so as to admit of two constructions, the consequences of the alternative constructions must be regarded, and that construction must not be adopted which leads to manifest public mischief, or great inconvenience, or repugnance, inconsistency, unreasonableness or absurdity, or to great harshness or injustice. ... 907. Statutes affecting jurisdiction of courts. Unless they do so by express words or necessary implication, statutes should not be construed so as to take away the jurisdiction of superior courts, or so as to extend that jurisdiction by giving a right of appeal from inferior courts. Statutory provisions giving jurisdiction to inferior courts, to government departments or to bodies created ad hoc must be strictly constructed, and the procedure prescribed must be exactly followed where it is important to do so having regard to the general object intended to be secured by the statute." Justice Freeman added the following comments : "The last paragraph quoted is helpful in bringing the present issues into focus. It will be seen that while s. 49 is a statute affecting the jurisdiction of a court, it does not purport to take jurisdiction from superior courts and give it to an inferior court, nor vice versa. First instance jurisdiction in protection cases is provided exclusively to the Family Court elsewhere in the Act. Section 49 does not transfer that jurisdiction; it merely directs how that jurisdiction should be exercised. The present concern is with the effects which flow when the procedure prescribed is not exactly followed. However, an increase or diminution of the jurisdiction of a superior court is clearly not one of those effects." The reasoning of the E.C. case was followed by Justice Bateman in M.D. v. Children's Aid Society (Halifax) (1991), 104 N.S.R. (2d) 388 which was upheld on appeal to this court in a decision reported at 113 N.S.R.(2d) 40. In this case, the Utility and Review Board has exclusive jurisdiction over appeals from the Tax Commissioner. The respondent complied with the time limitation respecting the filing of the Notice of Appeal. It is the function of the Clerk of the Board to set the appeals down for hearing. We were advised on the hearing of the appeal that there is nothing contained in the Rules of the Board that requires an appellant to appear to obtain a date for hearing, so the setting down is not within the control of an appellant. The procedure followed is that the Clerk telephones the parties to advise of available dates for a hearing and one of those that is convenient to both sides is chosen. While it could be said that there is some obligation on an appellant before the Board to ensure that the hearing is held within the sixty days, it could equally be said that in this case, the appellant (respondent before the Board) consented to the date chosen by not objecting when advised by the Clerk of the date chosen. This is not a situation in which there is any prejudice to the Minister of Finance as a result of the hearing before the Board being a few weeks late. It is not a situation where the rights of the Minister are effected in any way. In my opinion the jurisdiction of the Utility and Review Board to deal with this appeal was established when the Notice of Appeal was filed. In the absence of a clear intention to take the jurisdiction away for failure to have the appeal hearing within sixty days, none should be implied. It would be unreasonable and unjust to find that an administrative blunder of the Board could result in the loss of a statutory right of appeal from a decision of the Tax Commissioner. In my view the intent of s. 20L(3) is to merely establish a reasonable time frame in which tax appeals should be heard. The section is directory, not mandatory and therefore its breach does not result in a loss of jurisdiction. This ground of appeal is dismissed. The next three grounds of appeal concern the Board's findings that the respondent Union was not the user of the magazine, and that the magazine was purchased by subscription and delivered by mail. The relevant sections of the Health Services Tax Act are as follows: " 2 In this Act, . . . (c) 'consumption' or 'use' includes the provision by way of promotional distribution of any tangible personal property and the incorporation into any structure, building or fixture, of tangible personal property including those manufactured by the consumer or further processed or otherwise improved by him; . . . (o) 'purchaser' means any person who acquires tangible personal property at a sale in the Province for his own consumption or use or for the consumption or use by other persons at his expense, or on behalf of or as agent for a principal who desires to acquire such property for consumption, ... ; . . . (x) 'user' or 'consumer' means any person who within the Province utilizes any tangible personal property for his own consumption or use, or for the consumption or use of other persons at his expense, or on behalf of, or as the agent for, a principal who desires to acquire such property for the consumption or use by such principal or other persons at his expense and includes any person who within the Province consumes tangible personal property acquired by him for resale, or who within the Province consumes tangible personal property manufactured, processed or purchased by him within or without the Province; . . . 5 (1) Every purchaser shall pay to Her Majesty in right of the Province a tax . . . (c) at the rate of ten per cent of the purchase price of all other tangible personal property purchased other than that referred to in clauses (a) and (b). (2) For the purposes of this Act, every user and consumer shall be deemed to have purchased the tangible personal property from a vendor at a sale in the Province, and such property shall be deemed to have passed at the sale." In my view the parties when presenting this case to the Board and to this court proceeded as if the issue was whether the magazine was taxable. That is not the issue. The issue is whether the graphic design services are taxable. To determine that question, the first step is to ascertain whether the services are "tangible personal property" as defined in the Act: "(t) 'tangible personal property' (i) means personal property that can be seen, weighed, measured, felt or touched or that is in any way perceptible to the senses, (ii) includes electricity, telecommunication and telephone services, (iii) includes transient accommodation, (iv) includes repair services;" The services provided to the respondent by the graphic design company were to prepare one copy of the "black and white imageset proofs which are colour marked with overlays", which are later used to print the magazine. The "Tax Information Vendor Guide G1001" published by the Department of Finance indicates that persons engaged in the graphic design profession "are usually rendering a tax exempt service". The Guide also provides: "All services up to the point of creation of one original product are tax exempt to the client and tax must be paid, at the time of purchase, on the materials by the Graphic Designer." The invoices from the designer to the respondent indicate that the respondent paid sales tax on materials used by the designer in the process of creating the artwork. In my view the graphic design service at issue in this case is not "tangible personal property" and therefore is not taxable. The appeal on this issue is therefore dismissed. However, the Board came to the conclusion that the respondent's assessment was in error by an entirely different route. Although it is not necessary on the narrow issue in this case to decide whether the respondent "uses and consumes" the magazine, since, in my view, the Board's findings are in error in that respect, some comment is necessary. The issue of who is the user and consumer of the magazine is relevant to the taxes on the other tangible personal property used in the production of the magazine, such as the paper. In my view the teachers are the ultimate users of the magazine but they use or consume them at the expense of the Union. In Franklin Enterprises v. Nova Scotia (1981), 45 N.S.R. (2d) 604, the issue was whether soaps, matches, tissue paper, linens and other items supplied in hotel rooms were taxable when purchased by the hotel. The hotel argued that it was not the user of the goods, the hotel guests were the users, or alternatively, that it purchased the goods for resale to it guests. In dismissing the hotel's appeal of its assessment, Cowan, C.J.T.D. said at page 620: "In my opinion, the tangible personal property in question was purchased by the appellant for its own use, in carrying on the business of an hotel proprietor, to provide transient accommodation. In order to provide hotel rooms, furnished and equipped for such accommodation, it did purchase the tangible personal property in question and, after purchasing such property, it used that property in the business being carried on by it. There was no sale by the appellant to any other person of the tangible personal property. ... In the case of soap, matches and tissue paper, these articles, to the extent to which they were used from time to time, would be consumed. Nevertheless, I am of the opinion that these articles were used by the appellant in the carrying on of its business, in order to provide the usual soap, matches and tissue paper found in hotels of the type operated by the appellant. I am, therefore, of the opinion that all the articles of tangible personal property in question were purchased by the appellant at sales in the province for the appellant's own use. I also find that there was no sale by the appellant of any of the articles in question to any other person and, in particular, no sale of such articles to guests of the appellant's hotel. In the case of beds, bedspreads, linen and towels placed in hotel rooms, it is quite clear that these articles were placed in the hotel rooms for the use of guests while occupying the hotel rooms as guests. In the case of soap, matches and tissue paper, there was no sale of these items to guests but these items were placed in hotel rooms for the use of guests, and the only difference between these items and the other items is that, to the extent to which they were used by guests, they were normally consumed. It was suggested on behalf of the appellant that the goods in question were purchased by it for the purpose of re-sale, inasmuch as the cost of these articles was reflected in the price charged for hotel accommodation. In my opinion, there was no re-sale of any of these items by the appellant and their cost was not reflected in the price charged for hotel accommodation by the appellant, except to the extent that all costs of the appellant in the carrying on of its business as a hotel proprietor were reflected in the price which it charged for such hotel accommodation." The magazines in this case are analogous to the soaps and matches: they are made available to the teachers at no additional cost, they are included in the fees paid, there is no saving if they are not used. As the soap is not sold to the guests, neither is the magazine sold to the teachers. The magazine is provided for the use of the members as part of the service of the Union, to assist in fulfilling its role to promote education and teaching excellence. The cost of the magazine to the union was not charged specifically as a separate item to the teachers, but the cost is passed on in the sense that all its costs of operation are reflected in the establishing of the annual dues. In determining the question of whether the magazine is one that is sold by subscription it must be noted that in addition to the 11,500 copies sent to the schools for distribution to active teachers, another 3,500 copies are sent by mail to members of the Retired Teachers Association who pay a nominal membership fee. As well, another 500 copies are distributed on a complimentary basis to the various school board members, the MLA's and officials in the Department of Education. There are only three paid subscriptions. There are nine meanings given to the word "subscription" in the Shorter Oxford English Dictionary (1988). The one of interest here is the eighth: " A contribution of money for a specified object; spec. the fixed sum promised or required as a periodical contribution by a member of a society, etc. to its funds, or for the purchase of a periodical publication, or in payment for a book published 'by subscription' ..." The evidence of the process by which the governing body of the Union decided to publish a magazine is as follows: (p. 34 A.B.) "The provincial executive discussed the topic of having a magazine. They created a motion that was discussed at annual council by the delegates. The delegates approved that motion and in 1985 targeted a budget item to allow for the production of an inaugural issue. In the 1986 budget and thereon we've had a special budget line for Aviso that is approved annually at council." The respondent submits that the approval of a budget for the production of the magazine by delegates at an annual meeting amounts to a purchase by subscription by the individual teachers. Keeping in mind that the respondent has the burden of bringing itself within the exemption (see Stora Kopparbergs (1980), 45 N.S.R.(2d) 663), the submission, in my opinion, stretches the definition of subscription too far and it was an error of law for the Board to have accepted it. The fifth ground of appeal concerns the assessment for interest and penalties and the respondent has conceded that as a result of this court's decision in Minister of Finance v. Joint Truss Limited, October 18, 1994 that this ground of appeal should be allowed. Accordingly, that portion of the Board's decision is set aside. The Appeal of the Board's order respecting interest and penalties should be allowed. The appeal in respect of the sales tax on the graphic design fees should be dismissed and the order of the Board varying the Tax Commissioner's assessment confirmed, but for different reasons than those expressed by the Board. Having regard to the divided success, there should be no order for costs. Roscoe, J.A. Concurred in: Matthews, J.A. Freeman, J.A.