The Appellant, which had been operating a long-term care facility for seniors in Windsor, Nova Scotia decided to build a new facility in nearby Falmouth (the “Facility”). After the Department of Health accepted its proposal to build the Facility, it concluded a Development Agreement with the Department, which set out the terms upon which the Appellant was to develop the Facility, and entered into a “Service Agreement” with the Department, which set out the services that the Appellant was to provide through the Facility and the payments that it would receive from both the Nova Scotia government and the Facility’s residents. Although assisted–living facilities normally are subject to HST on their fair market value when substantially completed, s. 191.1(2) effectively deemed the HST to be payable on the greater of most costs and the fair market value (which was significantly lower than those costs) where the builder received government funding "for the purpose of making residential units in the complex available to [seniors]."
In dismissing the Appellant’s appeal based on CRA having assessed on the basis of the application of s. 191.1(2), Graham J indicated that the facts of this case were in all material respects identical to those in High-Crest, and that he agreed with the conclusions of Jorré J in that case:
- He agreed with Jorré J that “[s]o long as some portion of the total payments that the Department of Health made to the Appellant were made for the purpose of making residential units in the Facility available to seniors” the government funding test was met (para. 37), as was the case here given that the Service Agreement included accommodation in the required services, and the payments thereunder covered interest and principal under the mortgage financing.
- Similarly, given that the Service Agreement payments ultimately would cover the entire cost of constructing the Facility, the funding was in respect of the Facility.
- Even if, after completion of the Facility, the supplies made to the residents were a single supply of health care services, it nonetheless should be considered that the Appellant satisfied the test in s. 191.1(2)(b) that “possession or use of at least 10% of the residential units in the complex is intended to be given for the purpose of their occupancy as a place of residence or lodging by …seniors,” as was implicitly accepted by the Appellant in treating itself as subject to the self-supply rule in s. 191(3).