Old Republic Insurance Company of Canada Petitioner v. His Majesty the King in Right of the, 2024 BCSC 287

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: Old Republic Insurance of Canada v. British Columbia, 2024 BCSC 287 Date: 20240220 Docket: S215901 Registry: Vancouver Between: Old Republic Insurance Company of Canada Petitioner And His Majesty the King in Right of the Province of British Columbia Respondent Before: The Honourable Justice Tucker Reasons for Judgment Counsel for the Petitioner: S. Harcus F. Miltimore, Articled student Counsel for the Respondent: I. Filip S.A.E. Kay Place and Date of Trial/Hearing: Vancouver, B.C. February 28, 2023 and March 1, 2023 Place and Date of Judgment: Vancouver, B.C.

February 20, 2024 Table of Contents I. Introduction .. 3 II. The Appeal Framework .. 3 III. FACTS .. 6 IV. The DISPUTED ASSUMPTION .. 9 V. ISSUES .. 10 VI. IS OLD Republic OBLIGED TO PAY tax on DEALER FEES .. 10 A. Statutory Framework . 10 B. Positions . 14 C. Decision .. 17 1. Approach to Statutory

Interpretation .. 17 2. Established

Definitions . 19

3. The Province’s Symmetry Argument 20 4. The Asserted Doctrine of Indirect Receipt 20 5. Received or Receivable under the IPTA .. 28 VII. The APPLICABLE Tax Rate for ORVWP Premiums .. 32 A. Additional Statutory Framework . 33 B. Additional Facts . 35 C. Positions . 36 D. Decision .. 37 VIII. Disposition .. 41 I.

Introduction [ 1 ] This case involves a tax appeal of a November 5, 2020 decision (‘Decision’) made by the Minister of Finance (‘Minister’) for the Province of British Columbia (’Province’) under the Insurance Premium Tax Act , R.S.B.C. 1996, c. 232 (‘ IPTA ’). [ 2 ] Old Republic Insurance Company of Canada (‘Old Republic’) is an insurer.

In the Decision, the Minister upheld Notices of Reassessment issued on the basis that Old Republic had underreported its taxable vehicle warranty insurance premiums from the years 2013 to 2017 and remitted its premium tax at an improper rate. [ 3 ] Old Republic appeals the Decision under s. 18(1) of the IPTA . [ 4 ] Old Republic seeks a declaration that the tax owing by Old Republic in respect of vehicle warranty insurance premiums excludes the amount paid by policy purchasers to associated vehicle dealerships (‘Dealerships’) as a retail markup.

Old Republic also seeks a declaration that tax in respect of vehicle warranty insurance premiums is payable at the rate of 4 percent. II. The Appeal Framework [ 5 ] On a statutory appeal, questions of law, including questions regarding the

interpretation of the statute, are reviewed at a standard of correctness: Voroney v. British Columbia , 2020 BCSC 853 at paras. 15–17 and Mutual Fire Insurance Company of British Columbia v. British Columbia , 2021 BCSC 626 [ Mutual Fire ] at para. 45 . [ 6 ] Section 18(4.1) of the IPTA states that a statutory appeal under the IPTA is a new hearing and is not limited to the evidence and issues that were before the Minister.

Findings of fact are not reviewed on a ‘palpable and overriding error’ standard (as they would be in an appeal on the record below) and new evidence may be considered: see Teck Metals Ltd. v British Columbia , 2020 BCSC 2065 [ Teck ] at para. 16 .

The parties have, as they are entitled to, each filed a number of affidavits. [ 7 ] The parties agree that the review framework outlined in Teck also applies here: [17] On questions of fact in a tax appeal, the taxpayer has the onus of disproving, on a balance of probabilities, any assumptions or findings of fact made by the Minister or the commissioner in making the decisions. ... [18] In Northlands Properties Corporation v. British Columbia , 2010 BCCA 177 at paras. 21-25 , the Court discussed the approach to statutory appeals of tax assessments.

The courts have recognized that there is an imbalance in knowledge about the taxpayer’s affairs and that the taxpayer generally has much greater knowledge than the taxing authority. As a result, the taxing authority is entitled to make assumptions of fact as the basis for assessing a taxpayer. In an appeal of an assessment, the initial burden is on taxpayer to prove, on a balance of probabilities, that the assumptions on which the assessment is based are wrong.

The Court at para. 32, set out the ways in which a taxpayer may challenge the taxing authority’s assumptions: The taxpayer has a number of ways of meeting the Minister’s assumptions: Pillsbury at 5188. The taxpayer may (

a) challenge the Minister’s allegation that he did assume those facts, (

b) assume the onus of showing that one or more of the assumptions was wrong, or (

c) contend that, even if the assumptions were justified, they do not of themselves support the assessment. [19] The Court at para. 35, summarized the approach to be taken on appeals of tax assessments: In

summary form, the proper approach on the appeal of a tax assessment may be described thus:

i. What are the assumptions? ii. Have some or all of the assumptions been disproven? (i.e., has the taxpayer discharged the initial legal burden?) iii. If the taxpayer has successfully discharged the initial legal burden, then has the Crown shown that the assessment is valid? (i.e., has the Crown discharged the conditional legal burden?) [ 8 ] Assumptions play a pivotal role in tax assessment appeals. However, that role is confined to assumptions of fact. Statements or conclusions of law are not to be pleaded as factual assumptions: Huckleberry Mines Ltd. v.

Her Majesty the Queen in the Right of the Province of British Columbia , 2018 BCSC 1481 [ Huckleberry ], leave to appeal ref’d 2019 BCCA 124 at para. 12 ; Teck at para. 18 and 21 . [ 9 ] Where a tax authority sets out assumptions that are legal statements or conclusions (including statements and conclusions of mixed law and fact), those assumptions are not presumed to be correct: Teck at paras. 21–23 . The taxpayer has no burden to disprove assumptions that are not factual assumptions. [ 10 ] The Province has set out a list of 38 statements (‘Statements’) at paragraphs 20 and 21 of

Part 4 of its response to petition (‘Response’). The Response identifies these Statements as “the assumptions and findings of fact” made by the Minister in making the Decision. A list of the Statements is attached as

Schedule ‘A’ to these reasons for judgment. [ 11 ] The Statements include many statements and conclusions of law and/or of mixed fact and law. In particular, some Statements purport to state an

interpretation of the IPTA and/or of contracts. As noted by Justice Pearlman in Canada v. Anchor Pointe Energy Ltd ., 2003 FCA 294 at paras. 25–26 , such statements have no place in a tax authority’s pleading of factual assumptions. Old Republic is not under a burden to disprove the non-factual Statements. [ 12 ] One factual Statement is disputed – paragraph (

v) of

Schedule A (‘Disputed Assumption’). Old Republic bears the initial legal burden of proving, on a balance of probabilities, that the Disputed Assumption is incorrect. If Old Republic discharges that initial burden, then the Province has the burden of showing that the assessment is nonetheless valid: Northlands Properties Corporation v. British Columbia , 2010 BCCA 177 at paras. 10 , 15 and 24. [ 13 ] As the remaining factual Statements are not disputed, they are reflected in the background facts set out below. III.

FACTS [ 14 ] Old Republic is a federally incorporated company extra-provincially registered in British Columbia. Old Republic is an authorized insurer in British Columbia under the Financial Institutions Act , R.S.B.C. 1996, c. 141 (‘ FIA ’). [ 15 ] D.I.S.C.C. Enterprises Ltd. (‘DISCC’) is Old Republic’s sister company.

DISCC is incorporated pursuant to the laws of British Columbia, but is not an authorized insurer under the FIA . [ 16 ] In October 2003, Old Republic and DISCC entered into an agreement (‘DISCC Agreement’) under which Old Republic agreed to issue vehicle warranty insurance policies (‘ORVWPs’) as requested by DISCC. In return, DISCC agreed to indemnify and hold Old Republic harmless for any liability arising out of those ORVWPs.

DISCC also undertook to perform duties in connection with the ORVWPs, including administering, investigating and settling claims under the ORVWPs. [ 17 ] ORVWPs are commonly sold at Dealerships. They are bought by Dealership customers as part of the vehicle purchase transaction with the Dealership. [ 18 ] In June 2005, DISCC entered into an agreement (‘Agency Agreement’) with Tomerro Group Enterprises Inc. (‘Tomerro’). Under the Agency Agreement, Tomerro agreed to solicit Dealerships to enter into agreements to offer ORVWPs to Dealership customers (‘Dealer Agreements’).

In return, DISCC agreed to pay Tomerro a fixed fee (‘Tomerro Commission’) for each ORVWP sold by a Dealership under a Dealer Agreement. [ 19 ] Under the Dealer Agreements, the Dealerships were required to offer ORVWPs to their new and pre-existing retail customers on eligible vehicles. [ 20 ] The purchase price of the ORVWPs sold by the Dealerships to their customers had two components. [ 21 ] The first component comprised the cost to the dealer (‘Dealer Cost’). The Dealer Cost was set by a rate chart (‘Rate Chart’) provided to Dealerships by Old Republic. [ 22 ] The Dealer Cost comprised:

a) an amount to be retained as the loss reserve for the ORVWP (‘Reserve Amount’);

b) a DISCC administration fee; and

c) the Tomerro Commission. [ 23 ] The second component of the purchase price paid to the Dealership by the customer was a dealer fee (‘Dealer Fee’). The Dealer Fee was set by each participating Dealership at its discretion. [ 24 ] Dealer Fees vary significantly and can be substantial in proportion to the corresponding Dealer Costs. In one sample transaction,

the Dealership charged a total price of $2,336 for a warranty for which the remitted Dealer Cost to DISCC was only $877.80 (i.e., the Dealer Fee was $1,458.20). In another, the Dealership charged the customer a total of $5,250, and remitted a Dealer Cost of $3,412.50 to DISCC (i.e., the Dealer Fee was $1,837.50). [ 25 ] In practice, Dealership agents present a brochure to customers explaining the benefits of purchasing an ORVWP.

If the customer opts to purchase an ORVWP, the Dealership agent completes an application form (‘Application Form’) with the customer. [ 26 ] The Application Form sets out only the total purchase price payable by the customer for the ORVWP. [ 27 ] The title of the policy document received by the customer is ‘Old Republic Vehicle Warranty Policy’ and states: “This Vehicle Warranty Insurance Policy is insured by Old Republic Insurance Company of Canada”. [ 28 ] The ORVWPs are between Old Republic and the customer.

Neither DISCC nor the Dealership is party to the policy contract. [ 29 ] Each month, the Dealerships send DISCC the documentation for any and all ORVWPs sold and the amount collected in Dealer Costs. [ 30 ] Each month, DISCC sends Tomerro whatever portion of the received Dealer Costs is payable as Tomerro Commissions under the Agency Agreement.

Procedural History [ 31 ] From 2013 to 2017, Old Republic reported only the Reserve Amounts as taxable premiums and paid four percent premium tax on only the Reserve Amounts. [ 32 ] In 2019, the Ministry conducted an audit of the tax returns filed by Old Republic for the years 2013 to 2017. [ 33 ] On September 16, 2019, the Ministry wrote to Old Republic setting out adjustments to the premium tax payable from 2013 to 2017 on ORVWPs. The Ministry found that:

a) Old Republic was required to pay tax on the entire Dealer Cost (i.e., including the Tomerro Commissions and DISCC Administration Fees) and on Dealer Fees; and

b) Old Republic ought to have paid premium tax at a rate of 4.4 percent. [ 34 ] On November 25, 2019, Old Republic appealed the Ministry’s findings to the Commissioner of Income Tax (‘Commissioner’). On January 9, 2020, the Commissioner affirmed the Ministry’s findings and issued Notices of Reassessment on that basis. [ 35 ] Old Republic filed an appeal to the Minister under s. 17 of the IPTA on April 7, 2020. On November 5, 2020, the Minister issued a decision affirming the Commissioner’s findings and Notices of Reassessment.

In making his decision, the Minister relied on the Statements. [ 36 ] On June 21, 2021, Old Republic filed its appeal to the Supreme Court under s.18 of the IPTA . IV. The DISPUTED ASSUMPTION [ 37 ] The relevant [1] portion of the Disputed Assumption reads: [T]he dealerships advise policy purchasers and collect premiums to administer the ORVWP, act as a broker and adviser to Old Republic, examine, adjudicate and authorize the payment of claims under the ORVWP and collect and maintain records on behalf of Old Republic. [ 38 ] On the affidavit evidence before me I find that:

a) Dealerships do the following: i. provide information about ORVWPs to Dealership customers by presenting a brochure and explaining the benefits to them; ii. set the price for ORVWPs by ascertaining the applicable Dealer Cost from the Rate Chart, determining (at the Dealership’s discretion) the amount of the Dealer Fee, and adding the Dealer Cost and Dealer Fee to create a total purchase price; iii. complete the Application Form with the customer; iv. collect the total purchase price paid by the customer for the ORVWP; v. remit completed Application Forms, related tracking documentation and collected Dealer Costs to DISCC; and vi. retain the Dealer Fees for their own use.

b) DISCC performs the administrative work of examining, adjudicating and authorizing the payment of claims under the ORVWPs.

c) Dealerships do not perform any of the administrative work of examining, adjudicating or authorizing the payment of claims under the ORVWPs. [ 39 ] On the evidence, Old Republic has satisfied me that the Disputed Assumption is incorrect. In particular, the Dealerships do not

administer ORVWP claims. The Disputed Assumption is valid only to the limited extent it aligns with my factual findings in the paragraph above. [ 40 ] The Province submits that even if the Disputed Assumption incorrect, the Minister’s conclusions should still be confirmed on the remaining facts. [ 41 ] I will now consider whether the Minister’s conclusions should be confirmed on the facts as I have found them. V. ISSUES [ 42 ] Although disputed by Old Republic below, the appeal does not extend to the Minister’s conclusion that Old Republic is obliged to pay premium tax on the entire amount of the Dealer Cost.

Thus, there are only two issues on this appeal: 1. Is Old Republic obliged to pay premium tax on Dealer Fees? 2. Is the applicable tax rate for ORVWP premiums 4 or 4.4 percent? VI. IS OLD Republic OBLIGED TO PAY tax on DEALER FEES A. Statutory Framework [ 43 ] The general history of the IPTA is outlined in Mutual Fire at paras. 31–37 . IPTA ’s tax on insurance premiums derives from a tax imposed in the Special War Revenue Act , S.C. 1915, c. 8, s. 5(2), which was enacted during the First World War. In 1947, the Special War Revenue Act became the Excise Tax Act , S.C. 1947, c. 60.

In 1956, Parliament repealed the insurance premium tax provisions of the Excise Tax Act , and the provinces stepped in to impose the same tax by provincial legislation. In British Columbia, the IPTA was enacted by S.B.C 1957, c. 58, and subsequently amended to result in its present form. [ 44 ] The IPTA includes a number of statutory

definitions relevant to the issues in this proceeding. The IPTA refers to the FIA and incorporates terms from the FIA . [ 45 ] The IPTA

definitions of ‘insurer’, ‘insurance business’ and ‘taxable insurer’ are as follows: ‘ insurer ’ means an individual, corporation or other entity carrying on insurance business; … ‘ insurance business ’ has the same meaning as in the [ FIA ]; … ‘ taxable insurer ’ means (

a) an insurer that has a business authorization under the [ FIA ] to carry on insurance business; (

b) a prescribed insurer; or (

c) a member of a class of prescribed insurers[.] [ 46 ] The IPTA definition of ‘taxpayer’ reads: ‘ taxpayer ’ means (

a) A taxable insurer; (

b) A person resident in British Columbia who enters into an insurance contract with an insurer other than a taxable insurer; (

c) A trustee in bankruptcy … [ 47 ] The IPTA also defines ‘net taxable premiums’, ‘taxable premium’, ‘BC premium’ and ‘premium’: ‘ net taxable premiums ’ of an insurer for a taxation year means the amount, if any, by which the insurer‘s total taxable premiums for the taxation year exceeds the total of (

a) taxable premiums returned to policy holders by the insurer in the taxation year, and (

b) the cash value of dividends paid or credited in the taxation year by the insurer to policy holders under contracts of insurance in respect of persons resident or property situated in British Columbia;

… ‘ taxable premium ’ of a taxable insurer for a taxation year means a BC premium that is received or became receivable by the insurer in the taxation year, other than a premium received (

a) as consideration for an annuity contract, (

b) from another taxable insurer under a contract of reinsurance, or (c) [Repealed 2004-40-21.] (

d) for medical services or health care under a medical services or health care plan approved by regulation; … ‘ BC premium ’ means the premium payable under a contract of insurance in respect of a person resident or properly situated in British Columbia at the time the premium becomes payable; … ‘ premium ’ includes any payment made as consideration for a contract of insurance, or a contract of reciprocal insurance, including: (

a) premium deposits, (

b) assessments, (

c) registration fees, (

d) contributions by members, and (

e) any other compensation, but excluding payments made as consideration for (

f) a contract of marine insurance that is not pleasure craft insurance, or (

g) a contract of reciprocal marine insurance that is not pleasure craft insurance[.] [ 48 ]

Section 3 of the IPTA is the charging section, imposing on taxable insurers an obligation to pay tax, and to pay that tax at different rates for different contracts of insurance.

It reads: 3 Every taxable insurer must pay to the government a tax for each taxation year equal to the total of (a) 2% of the taxable insurer‘s net taxable premiums for the year received or receivable under contracts of life insurance, accident and sickness insurance and insurance that indemnifies or compensates for loss of salary or wages, (a.1) 4.4% of the taxable insurer‘s net taxable premiums for the year received or receivable under contracts of property insurance and automobile insurance, and (b) 4% of the taxable insurer‘s net taxable premiums for the year received or receivable under contracts of insurance not referred to in paragraph (

a) or (a.1). [ 49 ]

Section 3 does not oblige ‘insurers’ to pay tax on ‘premiums’. Rather, it obliges ‘taxable insurers’ to pay tax on ‘net taxable premiums’. A ‘net taxable premium’ is a defined subset of a ‘taxable premium’. A ‘taxable premium’ must be ‘a BC premium that is received or became receivable by the insurer in the taxation year’. [ 50 ] The IPTA

definitions above reference the FIA . The following FIA provisions and regulations are relevant here. [ 51 ] The FIA defines ‘insurance business’ and ‘insurer’ as follows: ‘ insurance business ’ means (

a) undertaking or offering to undertake to indemnify another person against loss or liability for loss in respect of a certain risk or peril to which the object of the insurance may be exposed, (

b) soliciting or accepting any risk, (

c) soliciting an application for a contract of insurance, (

d) issuing or delivering a (

i) receipt for any contract of insurance, or (ii) contract of insurance, (

e) in consideration of any premium or payment, granting an annuity on a life or lives,

(

f) collecting or receiving any premium for a contract of insurance, (

g) adjusting any loss covered by a contract of insurance, or (

h) advertising for any business described in paragraphs (

a) to (g), whether or not the person undertaking an activity or activities set out in paragraphs (

a) to (

h) can or does distribute any gain, profit ordividend, or otherwise disposes of the person‘s assets, to a member or shareholder of the person other than during winding up or ondissolution; … ‘insurer’ means an individual, corporation or other entity carrying on insurance business[.] [52]

Section 75 of the FIA prohibits unauthorized insurance business. [53] There is a regulation under the FIA entitled the Insurer Exemption Regulation, BC Reg. 366/2007. The Insurer ExemptionRegulation includes the following provision relating to s. 75 of the FIA: Manufacturer’s and retailer’s ORVWPs 4

Section 75 of the [FIA] does not apply to (

a) a manufacturer or a retailer, (

b) a corporation of which the manufacturer or retailer is a wholly owned subsidiary, or (

c) a wholly owned subsidiary of the manufacturer or retailer that provides vehicle warranty insurance or product warranty insurance that is solely incidental to the sale of the vehicle or product bythe manufacturer or retailer. [54] Section 171(2) of the FIA prohibits a person from acting as an insurance agent or insurance salesperson unless properly licensed. [55] There is a regulation under the FIA entitled the Insurance Licensing Exemptions Regulation, Reg. 328/90. It includes thefollowing exemption: Exemption from section 171 (2) of the Act 2 (1) Section 171(2) of the [FIA] does not apply … (

g) to a motor vehicle dealer or an employee or commissioned sales representative of a motor vehicle dealer whose only activity asan insurance agent or insurance salesperson is in connection with vehicle warranty insurance sold incidentally to the ordinary business ofthe motor vehicle dealer as such[.] B. Positions [56] In the Decision, the Minister stated as follows: The defined term ‘premium’ in the Act includes consideration for the contract of insurance; for the ORVWP, it is any amount that mustbe paid by the purchaser to receive the [ORVWPs].

This includes the Dealer Fee … … As indicated above, the determining factor for whether an amount paid is a premium, is whether is it paid as consideration for thecontract of insurance. Additionally, Old Republic does ‘receive’ the entire premium, when considering the definition of the term asexplained in Mintzer v. The Queen, (TCC), which you submitted. In Mintzer, the Court cited a Federal Court decisionof Morin v.

The Queen, (FC), 75 DTC 5061, explaining ‘the word ‘receive’ means to get or to derive benefit fromsomething, to enjoy its advantages...’ … the dealerships advise policy purchasers and collect premiums to administer the [ORVWPs],act as a broker and adviser to Old Republic, examine, adjudicate and authorize the payment of claims under the [ORVWPs] and collectand maintain records on behalf of Old Republic.

In this light, Old Republic has derived a benefit and enjoyed an advantage in respect ofthe Dealer Fee …, even without necessarily having these amounts in its hands. [Emphasis added] [57] In its Response, the Province framed its position this way: The definition of ‘premium’ and ‘BC premium’ look at what the payment is made for from using the lens of the purchaser/insured.

Theword ‘received’ in the definition of ‘taxable premium’ should be read in light of this, i.e., an amount that an insured pays as considerationis ‘received by the insurer’ (for purposes of the definition of ‘taxable premium’[)] if the insurer benefits from it or it is required by theinsurer to facilitate the commercial arrangement.

[58] While the Province’s submissions were consistent with that position, when elaborated on, the Province’s position appears toinvolve two different propositions which could also be advanced independently. [59] The first proposition is as follows. The IPTA definition of ‘premium’ is intentionally all-encompassing (‘and any othercompensation’) and the definition of ‘BC premium’ fixes the amount payable at the time of customer purchase. Thereafter, the onlydeductions permitted are the express ones built into the

definitions of ‘taxable premium’ and ‘net taxable premium’. Thus, theconsideration paid by the customer, unless removed in accordance with an expressly authorized deduction, is what is ‘received’ by OldRepublic, and is taxable accordingly. [60] Shortly put, that is an argument that the intention of the IPTA is to tax ‘premiums’ comprehensively and that the terms ‘payable’in ‘BC premium’ and ‘receivable’ in ‘taxable premium’ are intended as symmetrical reciprocals.

For convenient reference, I will refer tothis as the Province’s ‘symmetry argument’. [61] As the symmetry argument asserts that the consideration paid by a customer is presumptively received by Old Republic, theProvince asserts that Old Republic has, in effect, been improperly ‘deducting’ Dealer Fees from its received premiums before payingpremium taxes. [62] The second proposition is that ‘received’ in the definition of ‘taxable premium’ and s. 3 is properly interpreted as inclusive ofindirect receipt.

Thus, the Province argues that the Dealer Fees are ‘taxable premiums’ indirectly received by Old Republic as a ‘taxableinsurer’. [63] The Province says that this proposed

interpretation of ‘received’ is supported by judicial recognition of a general doctrine ofindirect receipt, which it submits has been recognized in a line of caselaw. [64] As to what constitutes indirect receipt under this doctrine, the Province submits that what is required is that Old Republic receivea benefit or obtain an advantage from the Dealer Fees being paid. It asserts that the evidence establishes that Old Republic obtains abenefit and advantage from the broader commercial arrangement in which Dealerships sell ORVWPs and collect Dealer Fees.

On thatbasis, it says Old Republic indirectly receives the Dealer Fees. [65] Old Republic, on the other hand, contends that s. 3 of the IPTA unambiguously obliges Old Republic to pay tax only onpremiums actually received, and that Old Republic and DISCC never received Dealer Fees and was never legally entitled to receivethem. The Dealerships are the persons who actually receive the Dealer Fees. [66] Old Republic submits that if the IPTA is found to be ambiguous on the point, then actual receipt is the preferred

interpretationgiven the presumption of constitutional conformity and the Province’s power to impose direct taxes under s. 92(2) of the ConstitutionAct, 1867 (U.K.), 30 & 31 Vict., c. 3, reprinted in R.S.C. 1985, App. II, No. 5, ss. 92(2): see Reference re Quebec Sales Tax [1994] 2S.C.R. 715 at 724–728, . [67] Finally, and in any event, Old Republic submits that it does not benefit by or get an advantage from Dealer Fees being paid toDealerships. The Dealerships set and retain the Dealer Fees, and engage in selling ORVWPS for their own business reasons andadvantage. C. Decision 1. Approach to Statutory

Interpretation [68] For reference, I will repeat the key IPTA provisions in dispute: ‘taxable premium’ of a taxable insurer for a taxation year means a BC premium that is received or became receivable by the insurer inthe taxation year[.] … Tax for taxable insurer 3 Every taxable insurer must pay to the government a tax for each taxation year equal to the total of (a) 2% of the taxable insurer‘s net taxable premiums for the year received or receivable under contracts of life insurance, accidentand sickness insurance and insurance that indemnifies or compensates for loss of salary or wages, (a.1) 4.4% of the taxable insurer‘s net taxable premiums for the year received or receivable under contracts of property insurance andautomobile insurance, and (b) 4% of the taxable insurer‘s net taxable premiums for the year received or receivable under contracts of insurance not referred to inparagraph (

a) or (a.1). [69] The core of the dispute is the meaning of the words “received or … receivable” in these provisions. [70] The principles of statutory

interpretation as they apply in the context of taxing statutes were laid out in Placer Dome Canada v.Ontario (Minister of Finance), 2006 SCC 20 at paras. 21–24. The following concise

summary of them was referred to with approval bythe Court of Appeal in British Columbia v. New Westminster Indian Band No. 566, 2022 BCCA 368 [NWIB]: [17] The judge turned first to the question of whether the Band was a ‘person’ for purposes of the definition of ‘taxpayer’ in the

IPTA . He noted that the parties were in agreement that the general principles of construing taxing statutes such as the IPTA were those set out by the Supreme Court of Canada in Placer Dome Canada Ltd. v. Ontario (Minister of Finance) 2006 SCC 20 :

a) the modern approach to statutory

interpretation applies to taxation statutes. That is, ‘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’;

b) a greater emphasis has often been placed on textual

interpretation where taxation statutes are concerned and ‘where the words of a statute are precise and unequivocal, those words will play a dominant role in the interpretative process’; c) ‘…where the words of a statute give rise to more than one reasonable

interpretation, the ordinary meaning of the words will play a lesser role, and greater recourse to the context and purpose of the Act may be necessary;

d) although ‘[r]eference to the purpose of the provision ‘cannot be used to create an unexpressed exception to clear language…’’, where ‘the provision admits of more than one reasonable

interpretation, greater emphasis must be placed on the context, scheme and purpose of the Act’; and

e) the residual presumption in favour of the taxpayer ‘applies in the exceptional case where application of the ordinary principles of

interpretation does not resolve the issue…no recourse to the presumption lies unless the usual rules of

interpretation have been applied, to no avail, in an attempt to discern the meaning of the provision at issue’. [At para. 18.] [18] The chambers judge agreed with counsel for the Band that the appropriate approach to interpreting words in a taxing statute is to consider the meaning of the word or words first at common law, then in the entire context of the statute, and finally in relation to similar provisions in other legislation. (In Burnaby Lake Greenhouses Ltd. v.

British Columbia , 2005 BCSC 1682 at para. 16 , the Court aptly described this analysis as proceeding in ‘concentric circles’.) [ 71 ] In Bell ExpressVu Limited Partnership v. Rex , 2002 SCC 42 , Justice Iacobucci (for the Court), after referring to the modern approach to statutory

interpretation, stated as follows: 27 The preferred approach recognizes the important role that context must inevitably play when a court construes the written words of a statute: as Professor John Willis incisively noted in his seminal

article ‘ Statute

Interpretation in a Nutshell ’ (1938), 16 Can. Bar Rev. 1, at p. 6, ‘words, like people, take their colour from their surroundings’. This being the case, where the provision under consideration is found in

an Act that is itself a component of a larger statutory scheme, the surroundings that colour the words and the scheme of the Act are more expansive. In such an instance, the application of Driedger’s principle gives rise to what was described in R. v. Ulybel Enterprises Ltd. , [2001] 2 S.C.R. 867, 2001 SCC 56 , at para. 52 , as ‘the principle of

interpretation that presumes a harmony, coherence, and consistency between statutes dealing with the same subject matter’. … [ 72 ] I am satisfied that the portions of the FIA that deal with insurance, the related FIA regulations, the IPTA and the IPTA regulations, are statutes dealing with the same subject matter for the purposes of the principle of

interpretation and that there is a presumption of harmony, coherence, and consistency between them. [ 73 ] As there is no ambiguity after application of the modern approach, there is no need to consider any further principles of

interpretation : Bell ExpressVu Limited Partnership at para. 28 2. Established

Definitions [ 74 ] In terms of ordinary meaning, the Concise Oxford English Dictionary , 12 th ed. (New York: Oxford University Press, 2011) provides the following definition of ‘receive’: receive n. 1. To be given, presented with or paid. [] take delivery of … [ 75 ] Old Republic points to the Concise Oxford Dictionary of Current English , 7 th ed. (New York: Oxford University Press, 1982) definition of ‘receive’: accept delivery of, take (proffered thing) into one’s hands or possession…[.] [ 76 ] Old Republic also relies on the Black’s Law Dictionary , 10 th ed. (St. Paul: Thomson Reuters, 2014)

definitions for ‘possession’ (p. 1352) and ‘receive’ (p. 1460): receive 1. vb. 1. To take (something offered, given, sent, etc.); to come into possession of or get from some outside source <to receive presents>. … possession . (14c) 1. The fact of having or holding property in one’s power; the exercise of dominion over property 2. The right under which one may exercise control over something to the exclusion of all others; the continuing exercise of a claim to the exclusive use of a material object. … [ 77 ] Neither party provided case law providing a common law definition. 3. The Province’s Symmetry Argument

[78] The symmetry argument is essentially an argument that the context, scheme and purpose of the IPTA endorse a very expansivedefinition of ‘receive’. [79] In my view, the IPTA, read together with the FIA and its regulations, does not support the Province’s symmetry argument. [80] While the general purpose of the IPTA is to impose tax on insurance premiums, had the goal been to comprehensively tax‘insurers’ for all ‘premiums’ paid by customers, that could and would have been done in a more straightforward manner.

Instead, thelegislature enacted a scheme based on ‘taxable premiums’, ‘taxpayers’ and ‘taxable insurers’. Notably, in some circumstances under theIPTA, the intended ‘taxpayer’ when a customer pays for an insurance contract is not an ‘insurer’ at all: NWIB at para. 11–13. [81] The symmetry argument also rests on an implied assertion that the ‘premium’ paid by a customer is indivisible such that it wouldnecessarily be ‘received’ by a single insurer.

The Province did not point to anything in the IPTA as support for that proposition, and I donot see any support for it in the statute. (I will return to this point below.) [82] Accordingly, I reject the Province’s position that intentional symmetry is a starting point for the interpretative analysis (as wellas the related statement in the Decision that the statutory definition of ‘premium’ is itself determinative). 4.

The Asserted Doctrine of Indirect Receipt [83] The next question is whether there is an established common law doctrine of indirect receipt that informs the properinterpretation of ‘receive’ in the IPTA. [84] The Province contends that the IPTA’s use of the term ‘receive’ should be interpreted in light of what it characterizes as arecognized doctrine of indirect receipt. The Province relies on the following caselaw: Mintzer v. The Queen, [1998] 3 C.T.C. 2380, (T.C.C.), Morin v. R., (FC), [1974] F.C.J. No. 974, 75 D.T.C. 5061 (Fed. T.D.); and InnovativeInstallation Inc. v.

The Queen, 2009 TCC 580 at para. 21; aff’d 2010 FCA 285 [Innovative]. [85] As I understand it, the following passage from Morin encapsulates the argument advanced by the Province: 22 The plaintiff submitted to us a very well prepared brief on legal theory and jurisprudence, drawing the Court‘s attention especially tothe

interpretation of terms, and numerous extracts from Maxwell were quoted, making reference to the ejusdem generis rule.Interpretation is obviously necessary when the words are vague or the legislator‘s intention doubtful, but not when the words are clearand the legislator‘s intention is so expressed as not to leave any doubt. … 26 Having studied, read and re-read the references given by counsel for the plaintiff, we find that there are no grounds here forapplying the ejusdem generis rule, except to say that the expressions ‘to benefit from, to gain advantage from or to profit from’ areincluded under the generic term ‘to receive’. (Emphasis added.) [86] As the Province’s argument evolved over the exchange of submissions, I will summarize the submissions made after reviewingthe relevant cases. [87] In Morin, the issue was whether Mr.

Morin’s income comprised the salary he was paid or the amount that he received after hisemployer deducted and remitted income tax. The Court rejected Mr. Morin’s argument that in order to ‘receive’ his salary, he had to“actually touch or feel it, or have it in his bank account”, and held that despite his never coming into possession of the remitted funds,the plaintiff had ‘received’ the deducted amounts because he had derived benefit from them (Morin, at paras. 23–26). [88] Mintzer is a decision of the Tax Court of Canada.

The Minister of National Revenue had retained, under s. 224.1 of the Income Tax Act, R.S.C. 1985, c.1 (5th Supp.) Canada Pension Plan (‘CPP’) benefits otherwise payable to Mr. Mintzer and applied them to set offa debt he owed to Canada in respect of previous years’ income tax. Mr. Mintzer was taxed on the amount of the CPP benefits as incomereceived by him in the year of the set off. Mr. Mintzer argued that he had never ‘received’ the CPP benefits. The Tax Court rejected hisargument. Justice O’Connor made the following findings, with reference to the surrounding case law: [6] Certain dictionary

definitions of ‘receive’ or ‘receipt’ might leave one with the impression that something is not received unless it isactually taken into one‘s hands or possession. However the case law is clear that an amount may be included in income even where it isonly notionally or constructively received. [7] In Morin v. The Queen, (FC), 75 DTC 5061, Lacroix J. of the Federal Court, Trial Division, stated as follows atpage 5064: In the case at bar the provincial and federal statutes state that income tax is payable on the salary, wages or remuneration that anemployee receives during a taxation year.

In this case the plaintiff was recorded in his employer‘s books as being entitled to a salary of$16,268.84. He contends that since the government deducted the amount of tax, he did not receive his full salary, given the fact that theamount of the tax was deducted at source. In other words, the plaintiff puts forward as a proposition of law that in order to receive hissalary in the legal sense, he must actually touch or feel it, or have it in his bank account.

We regret to say that this proposition seems to us absolutely inadmissible, because the word ‘receive’ obviously means to get or to derivebenefit from something, to enjoy its advantages without necessarily having it in one‘s hands. In other words, the plaintiff can, and must,say, ‘what is left of my salary or income, after taxes, is $14,639.85’; it is not correct to say ‘My income is only $14,639.85’. [8] In The Queen v. Hoffman, 85 DTC 5508, Rouleau J. of the Federal Court, Trial Division, stated as follows at 5510:

If the proposition that income must be in the actual possession of the employee before it can be taxed is correct, then I would have toconclude that an employee‘s contributions to Canadian or provincial pension plans, deducted at source by the employer, are not incomein the hands of the employee. Jurisprudence does not support this proposition. In Lucien Gingras v. M.N.R. [unreported decision dated March 26, 1973] the Tax Review Board noted (at page 4): The expression ‘touché’ (received) does not necessarily mean that the full amount of the salary must be physically received by the payeeor be deposited in full in his bank account. According to the

interpretation of s. 5 it is sufficient to say that the amount of the salary was paid by the employer either to the employeehimself or to his benefit, or that it was handed over to a third party under a federal or provincial statute. The fact that the defendant‘s employer deducted at source employee‘s social security contributions in the 1978 and 1979 taxation yearsdoes not support the proposition that he received income net of the withheld amounts. The amounts deducted and forwarded were for hiseventual benefit. [9] Finally, in The Queen v.

Fairey, (FC), 91 DTC 5230, Muldoon J. of the Federal Court, Trial Division found thatmoney which was automatically deducted from a government employee‘s salary and deposited into a pension fund was in effect receivedby the taxpayer in the sense that it accrued to his credit and his entitlement to it could not be disputed. [89] In Innovative, the company had a loan from a bank and key person life insurance had been taken out on the company’s founder.Under the life insurance contract, the insurance proceeds were to be paid to the bank against the loan.

When the founder died, the insurerpaid the bank and the bank applied the proceeds to discharge the loan leaving the surplus as a positive balance in the company account.The dispute was as to whether the company had ‘received’ the insurance proceeds for purposes of declaring a capital dividend under s.89(1) of the Income Tax Act. [90] The Tax Court held that it had, finding that the company obtained the primary benefit of the proceeds when its loan was paid andits net worth was increased. The incidental benefit to the bank in seeing the loan paid was comparatively insignificant.

In reaching theconclusion, the Tax Court expressly followed the line of authority reviewed in Mintzer. [91] The Crown unsuccessfully appealed the Tax Court decision: 2010 FCA 285. The Court of Appeal’s very brief reasons includethe following comments: [10] Second, the Crown says that the Judge erred in treating this as a case of constructive receipt in that Innovative merely received thebenefit of the proceeds of the policy. The concept of constructive receipt was inappropriate here, because Innovative had no prior claimto be paid the proceeds. [11] We do not agree.

While Sun Life was contractually bound to pay the proceeds to RBC, RBC was contractually bound by theterms of the group insurance policy to credit Innovative with them by discharging the balance of the loan. Innovative could have suedRBC in the event that it failed to apply the proceeds of the policy to pay off the loan and, if necessary, probably could have joined RBCto an action against Sun Life if it failed to pay the proceeds of the policy to RBC on Mr.

Peacock’s death. [92] In its response submission, the Province argued that these authorities establish that ‘notional’ or ‘constructive’ receipt is ‘receipt’,and that this form of receipt was sufficient for the purposes of s. 3 of the IPTA. It submitted that on the facts of the case, Old Republichad constructively or notionally received the Dealer Fees. [93] In reply, Old Republic argued that the Province’s authorities turn on the fact that the Income Tax Act includes an ‘indirectpayments’ provision. [94] Section 56(2) of the Income Tax Act reads: Indirect payments

(2) A payment or transfer of property made pursuant to the direction of, or with the concurrence of, a taxpayer to another person forthe benefit of the taxpayer or as a benefit that the taxpayer desired to have conferred on the other person (other than by an assignment ofany portion of a retirement pension under

section 65.1 of the Canada Pension Plan or a comparable provision of a provincial pension planas defined in

section 3 of that Act) shall be included in computing the taxpayer’s income to the extent that it would be if the payment ortransfer had been made to the taxpayer. [95] Old Republic submitted that if the Legislature had intended to tax the indirect receipt of premiums, it would have put a similarprovision in the IPTA. [96] Old Republic also cited legal commentary expressing the view that the “US doctrine of constructive receipt” does not exist inCanadian income tax law, notwithstanding that, in the commentators’ opinion, a few Canadian cases had used the term “imprecisely”:Brian J.

Arnold et al., Timing and Income Taxation: The Principles of Income Measurement for Tax Purposes, 2nd ed. (Toronto:Canadian Tax Foundation, 2015) [Timing], at p. 193. [97] The authors of Timing (see p. 192) note the following distinctions between constructive receipt, indirect receipt and receipt inkind: … Generally, according to the US doctrine of constructive receipt, where an amount of income is readily available to a cash-basistaxpayer, it is considered to have been received whether or not the taxpayer chooses to take possession of it.

An amount is generallyconsidered to be readily available to a taxpayer if it has been earned, it is a fixed amount, and the payer is both able and willing to pay.

The doctrine of constructive receipt is obviously closely related to the doctrines of indirect receipt and receipt in kind, but it is a distinctlyseparate concept. The doctrine of constructive receipt relates to the question of when income is considered to have been received by acash-basis taxpayer. The doctrine of indirect receipt applies once an amount has been received by someone, in order to determine whoshould be taxed in respect of that amount.

The doctrine of receipt in kind is concerned with the monetary amount to be included in ataxpayers income in respect of non-cash receipts. ... [98] Timing cites the line of cases the Province relies upon here as examples of decisions using the term ‘constructive receipt’imprecisely.

The authors express the view that Innovative involved “actual receipt and proof of a payment for the taxpayer’s benefit”(see Timing pp. 193–194), while Mintzer and its related cases involve “indirect receipt either under pension rules by tax withheld atsource, with actual receipt of the amount by the pension plan or government, as the case may be, for the benefit of the taxpayer” (seeTiming p. 194). [99] In sur-reply, the Province stated that its position on Dealer Fees was best characterized as an assertion of indirect receipt.

TheProvince quoted the following passage from Timing in further explanation of the meaning of indirect receipt (p. 187): … The concept of constructive receipt applies where a taxpayer’s control over an income amount is so unrestricted that it is appropriateto consider the taxpayer to have received the amount, whereas indirect receipt involves actual receipt by a third party for the benefitof the taxpayer. … The classic situation to which the doctrine of indirect receipt of income applies is a payment made to a third person at the direction of thetaxpayer.

The application of the doctrine of indirect receipt in this situation is given statutory expression in subsection 56(2).

In order forsubsection 56(2) to apply, a payment or transfer of property to a third person must have been made (the payment or transfer must havebeen received by the third person) pursuant to the direction or with the concurrence of the taxpayer, either for the benefit of thetaxpayer or as a benefit that the taxpayer desired to confer on the third person.’ [Province’s emphasis.] [100] The Province submits that there is a common law doctrine of indirect receipt and that it is a doctrine of general application (i.e.,not exclusive to income tax).

It contends that Parliament’s choice to give “statutory expression” to the doctrine in the form of s. 56(2) ofthe Income Tax Act, does not exhaust the doctrine. The Province did not provide the Court with any additional case law or otherauthority. [101] Given the Province’s final position, there is no need to address constructive receipt or receipt in kind.

The Province has clarifiedthat its position is best characterized as indirect receipt in the sense outlined in Timing and supported and illustrated by the case law theProvince has identified. [102] The question, then, is whether there is a common law doctrine of indirect receipt and, if so, whether it is of assistance ininterpreting the IPTA. [103] The current s. 56(2) was first introduced as s. 16(1) of the 1948 Income Tax Act and in the following form: INDIRECT PAYMENTS. 16.

(1) A payment or transfer of money, rights or things made pursuant to the direction of, or with the concurrence of, a taxpayer tosome other person for the benefit of the taxpayer or as a benefit that the taxpayer desired to have conferred on the other person shall beincluded in computing the taxpayer’s income to the extent that it would be if the payment or transfer had been made to him. [104] Like most Income Tax Act provisions, the indirect payments provision has been amended over time, but its essence has beenretained. (See, for example, Minister of National Revenue v.

Bronfman, [1965] C.T.C. 378, (CA EXC), setting out andaddressing s. 16(1)). The provision dealing with indirect payments came to be numbered as s. 56(2) as amended under the Income TaxAct, S.C. 1970-71-72, c. 63, and has carried forward as that subsection since. The test for the application of s. 56(2) is as set out inNeuman v.

M.N.R., [1998] 1 S.C.R. 770, at para. 32. [105] A close review of Mintzer and the cases cited therein reveals that this line of authority does rest on the indirect paymentsprovision in the Income Tax Act. [106] Morin was decided under Income Tax Act, and includes express reference to the indirect payments provision (then s. 16(1))(Morin, at para. 20). [107] In R. v. Hoffman, [1985] 2 F.C. 541, , Justice Rouleau applied s. 56(2), discussing the provision and the caselaw under it at length. His reference to Lucien Gingras v.

M.N.R. (an unreported decision dated March 26, 1973 of the Tax ReviewBoard) formed part of his s. 56(2) analysis (Hoffman at p. 547). He specifically identified Morin as forming part of the indirect paymentsjurisprudence (Hoffman at p. 550). [108] Justice Muldoon’s decision in Fairey (R.N.) v. M.N.R. (1991), 43 F.T.R. 309, (F.C.) [Fairey], is alsoexpressly based on s. 56(2). [109] Mintzer does not refer to s. 56(2). However, the cited passages in Morin, Hoffman, Lucien Gingras and Fairey are all from thediscussion of indirect payments in those decisions.

Further, in the closing paragraphs of Mintzer, Justice O’Connor states that, in hisview, Hoffman and Fairey “accurately reflect the state of the law”. In my view, that statement indicates that O’Connor J. was applyingthose decisions, not simply referring to them by analogy.

[110] That leaves Innovate. The reported facts are minimal. On the limited facts that are set out, it appears to me that the company didactually receive the proceeds, albeit not directly from the insurer, because the bank deposited the proceeds into the company’s account.It seems to me a matter of happenstance that the company’s account had a negative balance at the time of that deposit due to the loan.Further, as noted by the Court of Appeal, the company was entitled to insist the proceeds be so deposited. [111] That said, it makes no difference for present purposes.

In Innovate, the Tax Court made, and Federal Court of Appeal upheld, adecision following case law under s. 56(2) of the Income Tax Act. Neither decision suggests any intention to recognize or establish acommon law doctrine. [112] The Province has not persuaded me that there a common law doctrine of indirect receipt at all, let alone a common law doctrine ofindirect receipt of general application. 5.

Received or Receivable under the IPTA [113] I have rejected the assertion that the interpretative exercise should be approached from the perspective that the IPTA contemplatessymmetry in the manner asserted by the Province. I have also concluded that there is no common law doctrine of indirect receipt to lookto for interpretative assistance.

What remains is the Province’s assertion that the modern approach supports the conclusion that ‘receive’in s. 3 of the IPTA should be interpreted expansively and was intended to oblige Old Republic to pay premium tax on Dealer Fees in thepresent circumstances. (I pause to note that the Province did not advance any arguments specific to or founded on the term ‘receivable’.) [114] Old Republic asserts that, under the modern approach, s. 3 of the IPTA should be interpreted so that ‘received’ is limited to actualreceipt by the insurer and ‘receivable’ requires the insurer to have a legal entitlement to receive. [115] On consideration of the dictionary

definitions set out above, I find that the plain and ordinary meaning of ‘received’ entailssomething coming into one’s possession or into one’s dominion. However, it is significant that the IPTA wording is “received … orreceivable”. In my view, the fact that ‘receivable’ is the other alternative strongly suggests that ‘received’ requires actual receipt. [116] In Minister of National Revenue v. John Colford Contracting Co. Ltd., 26 DLR (2d) 15, (CA EXC), aff’d by 36DLR (2d) 442, (SCC) [John Colford], the dispute was as to whether a holdback awaiting a clearance certificate wastaxable income. The interpretative issue centred on the word ‘receivable’ in then s. 85B(1)(

b) of the Income Tax Act, R.S.C. 1952, c. 148.Judge Kearney stated as follows (at pp. 440–441): As ‘amount receivable’ or ‘receivable’ is not defined in the Act, I think one should endeavour to find its ordinary meaning in the field inwhich it is employed. If recourse is had to a dictionary meaning, we find in the Shorter Oxford, Third Edition, the word ‘receivable’defined as something ‘capable of being received.’ This definition is so wide that it contributes little towards a solution. It envisages areceivable as anything that can be transmitted to anyone capable of receiving it.

It might be said to apply to a legacy bestowed in the willof a living testator, but nobody would could regard such a legacy as an amount receivable in the hands of a potential legatee. In theabsence of a statutory definition to the contrary, I think it is not enough that the so-called recipient have a precarious right to receive theamount in question, but he must have a clearly legal, though not necessarily immediate, right to receive it. A second meaning, asmentioned by Cameron J., is ‘to be received,’ and Eric L.

Kohler, in A Dictionary for Accountants, 1957 edition, p. 408, defines it as‘collectible, whether or not due.’ These two

definitions, I think, connote entitlement. [Emphasis added.] [117] In my view, that is, as Judge Kearney concluded, the ordinary meaning of the term ‘receivable’ in the sense is relevant to thecontext.

Further, it is, in my opinion, reasonable to say that a person having a legal entitlement to receive some thing has it within theirdominion to control where that thing does go, by virtue of that legal right. [118] Where, as is the case under the IPTA, received and receivable are paired alternatives, and receivable is the more expansive termand extends to legally entitled to receive, then ‘received’ is more concrete and involves having come into possession. [119] In my view, the statutory context also favours interpreting received as actual receipt.

I conclude this because in my view the IPTAcontemplates the possibility that more than one ‘insurer’ may actually receive funds that were paid by a policy holder as a ‘premium’ inrespect of a single insurance contract. [120] In particular, the FIA regulations create exemptions specific to vehicle warranty insurance. Under these exemptions, Dealershipsare permitted to carry on limited aspects of ‘insurance business’ (e.g., advertising and selling vehicle warranty insurance policies,collecting and receiving associated premiums).

As such, the Dealerships are permitted to act as ‘insurers’ within the meaning of the IPTAand FIA without obtaining authorizations under the FIA, provided it is only incidental to the Dealership’s sales business. [121] In turn, the IPTA definition of ‘taxable insurer’ is open-ended and specifically provides for insurers acting without FIAauthorization to be brought into the definition by regulation. [122] Thus, the structure of the IPTA and FIA together contemplate the possibility of multiple ‘insurers’ acting in relation a singleinsurance contract.

More specifically, in the case of vehicle warranty insurance contracts, the FIA and IPTA contemplate that aDealership (who can sell a policy and collect premiums, but cannot be an underwriter) and an insurance company authorized under FIA(who can underwrite a policy) may both be as ‘insurers’ in relation to the same policy. [123] In this respect, the scheme and structure of the IPTA contemplate the Province taking steps to follow the path of ‘premium’ fundsand collect premium taxes from the person who actually received or was entitled to receive ‘premium’ funds. [124] Decisions under other provincial tax statutes also support this

interpretation. In Huckleberry, this Court considered the scheme setup under the Mineral Tax Act, R.S.B.C. 1996, c. 291.

[125] In Huckleberry, a mine entered into contractual arrangements whereby the purchaser of its product could enter into hedgingtransactions to establish a price for its product, instead of paying the value set out in an earlier sales agreement. The Mineral Tax Actlevies taxes based on the profits derived each fiscal year from the mine. One tax was based on the amount by which the mine’s grossrevenues exceeded its prescribed operating costs.

The dispute was as to whether the gross revenues should be determined using the priceset in the earlier sales agreement or based on the price actually paid to the mine after the hedging transactions. [126] Section 8(1) and (4) of the Mineral Tax Act dealt with the calculation of gross revenues: Gross revenues from operation of mine 8(1) Subject to subsections (2) and (3), the gross revenue derived from the operation of a mine by an operator for each fiscal year ofthe mine is the aggregate of the following: (

a) the amount that is the operator’s proportionate share of the transaction value of the mineral product disposed of in the fiscal yearof the mine; ... . . .

(4) The transaction value of a mineral product is the price paid or payable for the mineral product. [127] Justice Pearlman held as follows: [101] The Act achieves its purpose through a tax imposed on the profits realized by the mine’s operator from the disposal of itsmineral product.

Calculation of the amount of the tax requires a determination of the transaction value of the mineral product disposedof, which is the price paid or payable for the mineral product of the mine disposed of by the operator in each fiscal year. [102] Where, as here, the taxing statute imposes a tax based on price, the amount of tax will be determined by reference to the priceactually paid to the taxpayer: see Grosvenor Canada Limited v. South Coast British Columbia Transportation Authority, 2016 BCCA106; Ontario Subscribers of Healthcare Insurance Reciprocal of Canada v. Ontario (Minister of Finance), [2004] O.J.

No. 6203(S.C.J.); and Canada v. BASF Coatings & Inks Canada Ltd., (F.C.A.). [103] The purpose and object of the Act is achieved where the transaction value of the mineral product is the price the petitioneractually received.

The Legislature cannot have intended that the Province would assess and collect tax on amounts the operator of themine neither received nor was entitled to receive for the Hedged Quantities of the shipments. [Emphasis added.] [128] The Province argues that unlike the Mineral Tax Act, which made express reference to “price paid or payable”, the IPTA defines‘premium’ expansively so as to capture ‘any other compensation’. [129] I do not find that distinction persuasive.

While the statutory definition of ‘premium’ is expansive, the obligation to pay taxes doesnot rest on that definition – it rests on ‘net taxable premium’, which in turn rests on ‘taxable premium’.

The definition of ‘taxablepremium’ and the s. 3 charging provision both employ ‘received’ and ‘receivable’. [130] Justice Pearlman’s observation at para. 103 in Huckleberry – that the Legislature would not have intended the taxpayer to pay taxon payments it neither received nor was entitled to receive – is equally apt here. [131] I am satisfied that that the modern approach indicates that the IPTA’s definition of ‘taxable premium’ and the s. 3 chargingsection contemplate premium tax being payable by a ‘taxable insurer’ based on the amount of funds the taxable insurer actually receivedor was legally entitled to receive from ‘premiums’. [132] On the evidence, no part of the Dealer Fee is received by DISCC or Old Republic.

The Province did not advance any argumentthat Old Republic or DISCC had any legal entitlement to receive the Dealer Fees. Thus, the Dealer Fees were neither received norreceivable by Old Republic. VII. The APPLICABLE Tax Rate for ORVWP Premiums [133] The question is whether the applicable tax rate for ORVWP premiums is that set by IPTA, s. 3(a.1) or (b).

Once again, forconvenient reference: Tax for taxable insurer 3 Every taxable insurer must pay to the government a tax for each taxation year equal to the total of (a) 2% of the taxable insurer‘s net taxable premiums for the year received or receivable under contracts of life insurance, accidentand sickness insurance and insurance that indemnifies or compensates for loss of salary or wages, (a.1) 4.4% of the taxable insurer‘s net taxable premiums for the year received or receivable under contracts of property insurance andautomobile insurance, and

(b) 4% of the taxable insurer‘s net taxable premiums for the year received or receivable under contracts of insurance not referred to in paragraph (

a) or (a.1). [ 134 ] The Province says that ORVWPs are ‘contracts of property insurance’ and thus, taxable at 4.4 percent. Old Republic says ORVWPs fall under s. 3(b). [ 135 ]

Section 1 defines ‘property insurance’ for the purposes of the IPTA : ‘ property insurance ’ means insurance against the loss of or damage to property but does not include aircraft insurance, automobile insurance and hail insurance[.] A. Additional Statutory Framework [ 136 ] Under the FIA , insurers are required to separate funds by insurance class. Section 80(1) of the FIA reads: 80

(1) An insurance company transacting more than one class of insurance business must (

a) keep separate accounts for each class, and (

b) account for all premiums and claims in relation to each class as a separate fund. [ 137 ] There is a regulation under the FIA entitled Classes of Insurance Regulation , BC Reg. 204/2011 [ CIR ].

Section 2 of the CIR establishes the following classes of insurance (‘CIR Classes’) for the purposes of the FIA : (

a) accident and sickness insurance; (

b) aircraft insurance; (

c) automobile insurance ; (

d) boiler and machinery insurance; (

e) credit insurance; (

f) credit protection insurance; (

g) fidelity insurance; (

h) hail insurance; (

i) home warranty insurance; (

j) legal expenses insurance; (

k) liability insurance; (

l) life insurance; (

m) marine insurance; (

n) mortgage insurance; (

o) other approved products insurance; (

p) product warranty insurance ; (

q) property insurance ; (

r) surety insurance; (

s) title insurance; (

t) vehicle warranty insurance . [Emphasis added.] [ 138 ]

Section 1 of the CIR defines the classes listed in s. 2 . The

definitions set out include: ‘ aircraft insurance ’ means insurance against (

a) liability arising out of bodily injury to, or the death of, a person, or the loss of, or damage to, property, caused by an aircraft or the use of an aircraft, or (

b) the loss of, the loss of use of, or damage to, an aircraft;

‘ automobile insurance ’ means insurance (

a) against liability arising out of bodily injury to, or the death of, a person, or the loss of, or damage to, property, caused by an automobile or the use or operation of an automobile, (

b) against the loss of, the loss of use of, or damage to, an automobile, or (

c) that falls within paragraph (

a) or (

b) of the definition of ‘accident and sickness insurance’, if (

i) the accident is caused by an automobile or the use or operation of an automobile, whether or not liability exists in respect of the accident, and (ii) the policy includes insurance against liability arising out of bodily injury to, or the death of, a person caused by an automobile or the use or operation of an automobile; … ‘ hail insurance ’ means insurance against the loss of, or damage to, crops in the field caused by hail; … ‘ liability insurance ’ means insurance, other than insurance that falls within another class of insurance , (

a) against liability arising out of bodily injury to, or the disability or death of, a person, including an employee, (

b) against liability arising out of the loss of, or damage to, property, or (

c) if the policy includes the insurance described in paragraph (a), against expenses arising out of bodily injury to a person other than the insured or a member of the insured‘s family, whether or not liability exists; … ‘ other approved products insurance ’ means all types of insurance not otherwise included in another class of insurance; ‘ product warranty insurance ’ means insurance, not being insurance included in or incidental to any other class of insurance, under which the insurer undertakes, in the event of loss of, or damage to, personal property, other than a motor vehicle, to pay, for a specified period after it is purchased, the cost of repairing or replacing the personal property; ‘ property insurance ’ means insurance against the loss of, or damage to, property, and includes insurance against loss caused by forgery; … ‘ vehicle warranty insurance ’ means insurance, not being insurance included in or incidental to automobile insurance, under which the insurer undertakes, in the event of loss of, or damage to, a motor vehicle arising from mechanical failure, to pay, for a specified period after the motor vehicle is purchased, (

a) the cost of repairing or replacing the motor vehicle, (

b) towing fees, (

c) the cost of renting a substitute motor vehicle, or (

d) the cost of accommodation required because of the mechanical failure. B. Additional Facts [ 139 ] The ORVWP contract reads: Old Republic Insurance Company of Canada through its Administrator, in return for payment of applicable charge, agrees to arrange for the payment of the Cost to repair or replace the covered parts of Your Vehicle when due to a Mechanical Breakdown during the Term of this Policy. Replacement of any part may be made with like kind and quality, serviceable used or remanufactured parts. [ 140 ] The ‘key terms’ define ‘Mechanical Breakdown’: Mechanical Breakdown means the inability of a covered part, when properly cleaned and serviced, to perform the function(

s) for which it was designed due to defects in material and/or faulty workmanship in its manufacturing or wear beyond manufacturer’s tolerances or specifications. The manufacturer has established tolerances or specifications for the express purpose of defining failure or serviceability of a part. A Mechanical Breakdown will have occurred when the specifications of a covered part exceed the manufacturer’s tolerances. [ 141 ] The ORVWP General Policy Exclusions include: This Policy does not cover the following parts, services, conditions or events: …

8. Any loss caused by collision or upset, breakage of glass, missiles, falling objects, fire, theft or larceny, explosion, earthquake, windstorm, hail, water, flood, malicious mischief or vandalism, riot or civil commotion, lightning, contamination, rust, corrosion, freezing, smoke, acts of God or any cause whatsoever except as provided in the Policy . … 12. Incidental or consequential damages such as loss of use of Your Vehicle , inconvenience or commercial loss. C.

Positions [ 142 ] The Decision states: Vehicle warranty insurance provides coverage that is different from property and automobile insurance coverage as a matter of industry practice; however, this does not lead to the conclusion that it does not fall under the umbrella of property and automobile insurance in

section 3(a.1) of the Act for the purposes of determining the appropriate tax rate to be applied. Vehicle warranty insurance is also a type of property insurance.

All of these insurances cover some form of loss of, or damage to, property. [ 143 ] Old Republic relies on FIA and CIR as legislation relating to the same subject matter for the purposes of interpreting s. 3 of the IPTA : Bell ExpressVu Limited Partnership , at para. 27 . [ 144 ] Old Republic submits that since s. 80(1) of the FIA obliges insurers to keep proceeds in separate accounts by reference to CIR Classes, each CIR Class must be a separate and distinct class. It notes that under the CIR , ‘vehicle warranty insurance’, ‘property insurance’ and ‘automobile insurance’ are each a separate CIR Class.

On that basis, Old Republic submits that ‘vehicle warranty insurance’ cannot be a subset of ‘property insurance’ for purposes of s. 3(a.1). Rather, given that ‘vehicle warranty insurance’ is a distinct CIR Class, and given that it is not expressly listed in s.3(

a) or ( a.1 ), it falls by default to s. 3(b). [ 145 ] Old Republic also argues that the

interpretation of ‘contract of property insurance’ should be read consistently with what it says is a widely accepted insurance industry practice. It asserts that standard commercial property insurance policies commonly exclude mechanical breakdown as peril. [ 146 ] The Province contends that the IPTA defines ‘property insurance’ and that vehicle warranty insurance is plainly insurance against the damage and loss of property for the purposes of s. 3(a.1) of the IPTA . D. Decision [ 147 ] First, I note that there are Statements that pertain to this issue. In particular, the Statements include the following: hh) Vehicle warranty insurance is a type of property insurance. …

p) ORVWP provides coverage for some form of loss of, or damage to, property. [ 148 ] These Statements are not assumptions of fact. Old Republic has no burden to disprove them. [ 149 ] I accept that s. 80 of the FIA and the CIR are legislation dealing with the same subject matter as the IPTA for purposes of interpreting the IPTA . I also accept that s.80 of the FIA obliges insurance companies to segregate proceeds by reference to CIR Class.

Among other things, s. 80 results in record keeping that would be useful in conducting an audit under the IPTA . [ 150 ] That does not, however, resolve the matter. [ 151 ] First, the CIR acknowledges that CIR Classes may overlap, as it expressly addresses that overlap in some instances. For example, the CIR Class definition of ‘liability insurance’ uses the exclusionary phrase “other than insurance that falls within another class of insurance”.

Additionally, the CIR Class definition of ‘product warranty insurance’ includes the exclusionary phrase “not being insurance included in or incidental to any other class of insurance”. Notably, nothing was included in the CIR Class definition of ‘property insurance’ to prevent other CIR Classes from being subsumed within. Further, there is no such language in the ‘property insurance’ CIR Class definition notwithstanding the obvious expansiveness of term ‘property’. [ 152 ] Second, the IPTA has its own statutory definition of ‘property insurance’.

Notably, the body of the IPTA definition mirrors the body of the CIR Class definition. However, the IPTA definition goes on to specifically exclude aircraft, automobile and hail insurance from its scope. Each of those exclusions is (like ‘vehicle warranty insurance’) also a CIR Class. The Legislature does not act without reason. To wit, aircraft, automobile and hail insurance were excluded because they were otherwise included. Further, the Legislature excluded those three notwithstanding that they are also CIR Classes.

Thus, the IPTA definition of ‘property insurance’ itself belies Old Republic’s assertion that CIR Classes are necessarily separate and distinct. [ 153 ] Old Republic argues against such on

interpretation of CIR Classes on the ground that it cannot be harmonized with the FIA , s. 80 obligation. However, an insurance company could still comply with s. 80 by creating sub-accounts for CIR Classes that are subcategories. [ 154 ] I conclude that it is possible for a class defined as a CIR Class (i.e., ‘vehicle warranty insurance’) to be subsumed by the IPTA’s

definition of ‘property insurance’. [ 155 ] Neither party provided any authorities considering the term ‘property insurance’ as used in legislation. [ 156 ] The Province cites Raylo Chemicals Inc. v. AXA Pacific Insurance Co ., 1999 ABQB 177 [ Raylo ]. In Raylo , the plaintiff sought an order requiring its insurer to defend it in a legal action. The question for the court was whether the legal claim against the plaintiff could potentially fall under their insurance policy coverage. [ 157 ] In reviewing the plaintiff’s insurance policy, the court made the following comments about the nature of property insurance: [18] … Under insuring agreement 1(

c) the insurer agrees to indemnify Raylo for liability which it becomes obligated to pay, ‘for damages because of . . . injury to or destruction of property, including loss of use thereof, . . . due to an accident or occurrence’. … As to the word ‘property’, it is not restricted to tangible property and therefore may be interpreted perhaps more broadly to include tangible as well as intangible property. The Concise Oxford Dictionary refers to ‘property’ as ‘owning, being owned, thing owned, possession(s), esp. real estate’.

Blacks Law Dictionary , Fifth Edition, defines the word: . . .as commonly used to denote everything which is the subject of ownership, corporeal or incorporeal, tangible or intangible, visible or invisible, real or personal; . . . Property embraces everything which is or may be the subject of ownership, whether a legal ownership, or whether beneficial, or a private ownership . . . [it] includes not only ownership and possession but also the right of use and enjoyment for lawful purposes. [19] In interpreting an insurance policy like any other contract, one should look at the instrument as a whole.

Although property is not defined in the policy, it is referred to in exclusion 7 which provides that the insurance under insuring agreement 1(

c) does not apply ‘to claims arising from loss of use of tangible property which has not been physically injured or destroyed resulting from’ certain specified causes or situations. By using the modifier ‘tangible’ in the exclusionary clause, this aids in the

interpretation of the word ‘property’ used in insuring agreement 1(

c) as including both tangible and intangible property. This would accord with the general principle that the entire policy must be read so that the true ‘intention can be ascertained’ ( Nichols v. American Homes, supra ).

In addition, in using the word ‘damages’ in conjunction with the words ‘injury to or destruction of property, . . . or loss of use of property which has not been physically injured or destroyed’, conveys to me as a matter of ordinary language and usage, that it was intended to include in the term ‘property’, loss of rights or interests in property, such as the right of enjoyment of property or the right to use or possess property.

That is to say, all of the rights associated with property ownership, possession or use. [Emphasis added.] [ 158 ] The Province contends that the plain and ordinary meaning of ‘property insurance’ is insurance against loss or damage to the insured’s property. It says vehicles and vehicle parts – howsoever lost or damaged – are property. [ 159 ] Old Republic submits that ‘property insurance’ for purposes of the IPTA should be interpreted in a manner that is consistent with the widely accepted meaning of the term in the insurance industry.

It cites Richard Krempulec Q.C., Property Damage Claims Under Commercial Insurance Policies (Thomson Reuters, 2020) [ Property Policies ] with respect to the content of a standard commercial property insurance policy. [ 160 ] Property Policies includes the following statements:

Chapter 7 — PERILS INSURED AND EXCLUDED … 7:10 — PROPERTY DAMAGE MUST BE CAUSED BY AN INSURED PERIL Property policies will respond to loss or damage to property from external forces caused by a fortuitous event, subject to exclusions in the policy. Insurance coverage is not usually extended to property that is defective either because of latent defect, faulty design, inherent vice or faulty materials. The property policy is not a warranty that the products purchased by the insured are properly designed and manufactured. The purpose of a property policy is not to provide the insured with a better product than the one that was initially purchased. As discussed in

Chapter 1, ‘Policies Dealing With Property Claims’, there are a variety of commercial property policies, most of which are issued on an all-risk basis and apply to property of every description, otherwise known as an all-risk POED policies. This means all perils of whatever nature or kind are insured under the policy with respect to property of every description, subject to certain exclusions. … 7:24 – … The case law established that mechanical breakdown is inherent in the object and, simply because an object does not function, does not mean that there is a mechanical breakdown within the meaning of the policy.

Mechanical breakdown must come from inside the object itself, and not from any external cause. If there are internal and external perils, both of which concurrently cause damage, the issue as to whether coverage is excluded will depend on the wording of the exclusion. [Emphasis added.] [ 161 ] In my view, Property Policies supports the Province’s argument that insurance for loss and damage to vehicle parts is property insurance. The fact that standard property insurance policies commonly exclude mechanical breakdown as a peril indicates that

mechanical breakdown would, but for the express exclusion, be a peril covered by a contract of property insurance. [ 162 ] On a plain reading, a contract of property insurance is a contract for insurance that protects the insured’s property. These is no basis in the IPTA for importing commercial practices that would require an analysis of what is – or is not – a standard industry exclusion at any given time. Such a definition would be contentious and cumbersome.

It would oblige an auditor to review individual contracts for standard and non-standard terms. [ 163 ] I would also note that a standard commercial property policy, based on Old Republic’s position, would also presumably not cover aircraft, automobiles and crops, and yet the Legislature felt it was necessary to exclude those from the IPTA definition of ‘property insurance’. [ 164 ] I am satisfied that on a plain and ordinary reading of the text, along with consideration of the scheme and the purpose of the IPTA , the modern approach produces a clear answer to the interpretative issue of what was meant by ‘property insurance’. ‘Property insurance’ is insurance that insures property against loss or damage.

Vehicle warranty insurance does that. VIII. Disposition [ 165 ] The issues on appeal are answered as follows:

a) The Dealer Fees were not received or receivable by Old Republic for purposes of

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