Comments on Fiducie Sylvie Vallée v. Canada and Hewlett Packard Ltd. v. Canada

Sandra Hassan,
M. Fisc.
(with the collaboration of
Chikwa Zahinda, Legislative Counsel)
Department of Justice of Canada


The interest of the decision in Fiducie Sylvie Vallée v. Canada[1], which is the subject of the first part of this Chronique, lies in the fact that it is the first to discuss section 8.2 of the Interpretation Act (Canada)[2] in relation to the Goods and Services Tax (the "GST"). This article begins with an analysis of that decision and then examines the judge's reference to the Interpretation Act.

The concepts of "acquisition" and "disposition" under the Income Tax Act[3] continue to be the subject of serious dispute. Recent case law in this area was canvassed in an earlier Chronique.[4] The second part of this Chronique will deal with the most recent decision of the Federal Court of Appeal on this issue in Hewlett Packard Ltd. v. Canada.[5]

1. Analysis of Fiducie Sylvie Vallée**

1.1. The facts

The issue in this case was whether the appellant, Fiducie Sylvie Vallée, was entitled to a rebate for an owner-built home under the Excise Tax Act.[6] In particular, the Tax Court of Canada had to determine whether the trust was a "particular individual" under subsection 256 (2) E.T.A.

The facts of the case, which took place in the province of Quebec, are quite simple. In July 2000, Fiducie Sylvie Vallée was constituted and, at the end of this month, it acquired land and subsequently caused a residence to be built on it. After the construction, Fiducie Sylvie Vallée claimed the GST rebate for owner-built houses under subsection 256 (2) E.T.A. The Minister refused to grant the rebate on the basis that the appellant trust was not a "particular individual", a decision that the trust challenged.

1.2. The parties' position and the court's decision

The appellant argued that it was a particular individual. It claimed to be a protective trust (une fiducie de protection d'actifs) and that, consequently, it had no separate juridical personality, unlike a common law trust. The appellant also argued that since it was a protective trust it did not belong to the class of trust distinguished from an "individual" in the definition of "person" in subsection 123 (1) E.T.A. The Minister contended that, since the appellant was a trust, it could not be a particular individual according to the meaning of this term in the E.T.A.

While recognizing that a civil law trust, and thus the appellant, had no juridical personality, the Tax Court of Canada recognized that it was a "person" as defined in the E.T.A. However, it found that a trust was not a "particular individual" for the purposes of the E.T.A. since it was not a natural person.

1.3. Analysis and commentary

1.3.1. Juridical personality

At the outset, the appellant argued that since it was a trust it had no juridical personality. However, the appellant added that this was [Translation] contrary to the situation in the case of a common law "trust" . There are problems with this comment, in the author's opinion, as will be seen below.

The author shares the Court's conclusion confirming the appellant's argument that a civil law "trust" has no juridical personality. In civil law, there are two kinds of "persons": natural persons and legal persons. The Civil Code of Québec[7] provides that these two types of persons have a juridical personality.[8] A trust has no juridical personality and is not a person within the meaning of the Civil Code of Québec. Under article 1261 C.C.Q., it is a patrimony by appropriation and distinct from the patrimony of the settlor, the trustee or the beneficiary and is a patrimony in which none of them has any real right.[9]

Since neither the settlor, the trustee nor the beneficiary has any real right in the trust property, the property is thus without an owner. It is not the property of the settlor, nor is it the property of the beneficiaries. It is also not the property of the trustee but, according to article 1278 C.C.Q., it is exclusively administered by the trustee who has the exercise of all the rights pertaining to the patrimony. He is not the owner but acts as the administrator of the property of others charged with full administration.

The appellant pleaded, it will be remembered, that a common law trust has a juridical personality. This led the Court to make the following statement, which left the author somewhat perplexed:

In common law, generally speaking, it can be said that a trust has its own juridical personality and, as a result, an autonomous and distinct patrimony; on the other hand, in Quebec civil law, the lawmaker wanted the trust to be different in that it has its own patrimony without, however, having a distinct juridical personality.[10] (Emphasis added)

If it is true that a civil law trust has no juridical personality, this is also true, in the author's opinion, of a common law trust. In common law, a trust is a legal relationship in the context of which the trustee exercises rights over the trust property for the benefit of the beneficiaries.[11] The trustee holds the legal title to the trust property while the beneficiaries are the owners of it in equity.[12] This distinction between beneficial ownership and legal ownership, need it be explained, does not exist in Quebec civil law. Thus, while in civil law, a trustee is an administrator of the property of others without a real right in the property that he administers, a common law trustee has not only the power to administer the trust property but also has the legal ownership of it. As for the beneficiary of a civil law trust, his rights are limited to requiring "the provision of a benefit granted to him or the payment of both the fruits and revenues and the capital or of only one of these."[13] The beneficiary does not have an ownership right over the property, in contrast to the beneficiary of a common law trust who, as the owner in equity of the property held in trust, enjoys certain rights in rem.[14]

In common law, the trustee's duty to act in the interests of the trust beneficiaries is so important that in certain circumstances the property may be traced into the hands of third parties:

The beneficiary is allowed to trace the trust property into its product. The beneficiary has a similar right against anyone to whom the trustee has transferred the property, provided the transferee was a volunteer or took notice of the trust.[15]

Is it because of the divide between title in common law and title in equity that the Court said that the common law trust property forms an "autonomous patrimony"? Or is it in relation to the right to trace the property and the other remedies in rem? The ambiguity may arise from the use of a vocabulary specific to the civil law in order to express in general terms a rule relating to common law trusts, since common law trusts do not recognize a "patrimony" equivalent to the patrimony in civil law.

1.3.2. Is a trust ("fiducie") a person or a particular individual within the meaning of the Excise Tax Act?

The crux of the problem arises not from the differences between civil law and common law trusts but essentially from the definition of "particular individual" within the meaning of the E.T.A. Had it been found that a trust was a "particular individual", the appellant would have been entitled to the rebate under subsection 256(2) E.T.A. The provisions at issue are reproduced below in both linguistic versions.


"person" "person" means an individual, a partnership, a corporation, the estate of a deceased individual, a trust, or a body that is a society, union, club, association, commission or other organization of any kind;


"personne".—"Personne" particulier, société de personnes, personne morale, fiducie ou succession, ainsi que l'organisme qui est un syndicat, un club, une association, une commission ou autre organisation; ces notions sont visées dans des formulations générales, impersonnelles ou comportant des pronoms ou adjectifs indéfinis


(a) a particular individual constructs or substantially renovates, or engages another person to construct or substantially renovate for the particular individual, a residential complex that is a single unit residential complex or a residential condominium unit for use as the primary place of residence of the particular individual or a relation of the particular individual, […]

the Minister shall, subject to subsection (3), pay a rebate to the particular individual equal to […]

256(2) Le ministre verse un remboursement à un particulier dans le cas où, à la fois :

a) le particulier, lui-même ou par un intermédiaire, construit un immeuble d'habitation - immeuble d'habitation à logement unique ou logement en copropriété - ou y fait des rénovations majeures, pour qu'il lui serve de résidence habituelle ou serve ainsi à son proche



The question of whether a trust is a person did not arise. As the court stated, [Translation] "[w]hether this is a trust under the C.C.Q. or a trust under the common law, in either case, it involves a person within the meaning of subsection 123 (1) E.T.A."[16] Trust is included in the definition of "person" in subsection 123(1) E.T.A. Parliament thereby distances itself from the private law of the provinces.

The question did arise however of whether a trust is a "particular individual" for the purposes of the E.T.A. It should be noted at the outset that the term "particular individual" is not defined, whereas the term "individual" — a corresponding term in the English version — is defined thus: "individual" means a natural person.[17]

Starting from the premise that common law trusts have a juridical personality (a premise which is false), the appellant argued that the trust referred to in the definition of "person" could only be the juridical entity provided with such a personality. Having shown that the civil law trust does not have a juridical personality, the appellant argued that it was consequently justified in claiming that it was not the kind of trust distinguished from an individual in the definition of "person". The appellant concluded its syllogism, therefore, by arguing that it was a "particular individual" for purposes of subsection 256 (2) E.T.A. because of this exclusion.

The court first noted that the E.T.A. does not define "particular individual". To give this term a meaning, the court resorted to the general rules of interpretation, in particular, the plain meaning rule. It adopted the well known comments of Driedger that "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"[18] and repeated the principles of interpretation identified by the Supreme Court of Canada, inter alia, in Will-Kare Paving & Contracting Ltd. v. Canada[19], Bell ExpressVu Ltd. Partnership v. Rex[20] and, more recently still, in CCH Canadian Ltd. v. Law Society of Upper Canada.[21]

In looking for the ordinary meaning of the term "particular individual", the court used the dictionary meaning of this term to finally find, correctly in the author's opinion, that:

Even if there is no doubt that the trust, a creation of Quebec civil law, may be considered as a person under the E.T.A., it is not possible, however, to conclude that this person is also a particular individual within the meaning of this Act, since the person is not a natural person.[22]

The author believes that interpreting the two sections of the Act together would also have enabled the same result to be reached. Is it not true that in Canada the law is expressed in both official languages and that the intent of Parliament is to be sought in the analysis of the two versions? Since the English version of the E.T.A. contains a definition of the term "individual", should that definition been looked at in order to find the meaning to be given to the French expression corresponding to the term "particulier"? If, for greater accuracy, Parliament indicates that the term individual includes only natural persons, is it not reasonable to give the same meaning to the French term and conclude therefore that all trusts are excluded from the term?

1.3.3. Sections 8.1 and 8.2 of the federal Interpretation Act and the uniform application of an enactment nationwide

Finally, the author would like to emphasize Tardif J.'s reference to section 8.2 and subsection 8 (1) of the federal Interpretation Act. As mentioned in the introduction, to the author's knowledge, this is the first decision on the E.T.A. that involves section 8.2 of the Interpretation Act. This rule of interpretation for provisions harmonized with the civil law of Quebec and the common law of the other provinces reads as follows:

8.2 Unless otherwise provided by law, when an enactment contains both civil law and common law terminology, or terminology that has a different meaning in the civil law and the common law, the civil law terminology or meaning is to be adopted in the Province of Quebec and the common law terminology or meaning is to be adopted in the other provinces.The purpose of this section is to set aside the rule of interpretation that Parliament does not speak in vain. It recognizes that Parliament may sometimes use civil law and common law concepts in one provision to express a law. In such a case, an exception is provided to the general rule; in applying the enactment to Quebec, the civil law terms will be taken into consideration and the common law terms disregarded. The same will be true when a federal enactment is applied elsewhere in Canada in that the common law concepts will apply whereas the civil law terms will be ignored. This rule is stated in the first part of the provision: "[…] when an enactment contains both civil law and common law terminology, […] the civil law terminology or meaning is to be adopted in the Province of Quebec and the common law terminology or meaning is to be adopted in the other provinces."[23]

The second part is expressed as follows: "[…] when an enactment contains […] terminology that has a different meaning in the civil law and the common law, the civil law terminology or meaning is to be adopted in the Province of Quebec and the common law terminology or meaning is to be adopted in the other provinces."[24] Unless otherwise provided by law, where Parliament uses terms that have a different meaning in civil law and in common law, the terms must be given a meaning compatible with the legal system of the province in which the enactment is applied.

The terms "person" and "trust", which are used in the E.T.A., are private law concepts. In the first case, Parliament intervened and gave a meaning to the term that was distinct from the meaning given it by provincial private law. Section 8.2 of the Interpretation Act is of no assistance in interpreting this concept. As for the meaning of the term "trust" ["fiducie"], the rule in section 8.2 of the Interpretation Act requires recourse to the civil law to interpret the word if the enactment is applied to Quebec, just as the common law rules will apply as the suppletive law for the interpretation of the term elsewhere in Canada.

The author does not believe, however, that it is necessary to resort to section 8.2 of the Interpretation Act in order to decide the basic issue of whether a trust is a "particular individual". Since the terms "particular individual" and "particulier" are not private law concepts, they must be understood in their generic meaning of a natural person. The private law of the provinces accordingly does not play a role in completing the federal law in such a case, and section 8.2 of the Interpretation Act would not be applicable.

It is true that the E.T.A. applies to the country as a whole. However, by this it should not be understood that the Act must, in every case, be applied in the same way across the country. Such a reading of the Act would not take the will of Parliament into consideration, as expressed in section 8.1 of the Interpretation Act[25], to accept that federal law provisions relating to private law, when incomplete, explicitly or implicitly refer to the private law of the provinces.

Now that section 8.1 of the Interpretation Act has been enacted, is it appropriate to resort to the principle that a federal statute should be applied uniformly in cases where Parliament has decided to incorporate private law concepts without defining them? By enacting section 8.1 of the Interpretation Act, Parliament has enshrined the principle that the application of a federal enactment can give rise to differing treatments because of the specific features of the private law in the various Canadian provinces. Parliament left room, however, for judicial interpretation by providing that the rule of complementarity applies "unless otherwise provided by law". In some cases, the courts may decide that it is not appropriate to complete the federal legislation with the private law of the provinces. This will be the conclusion where the term is defined, where the term is not a legal term or is not a private law term, where a term is used in its ordinary meaning or where the provision is part of a specific area of federal law (such as Aboriginal land ownership).


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