Juster v. The Queen, 74 DTC 6540, [1974] CTC 681 (FCA)

The Chief Justice (concurred in by Hyde, DJ):—This is an appeal from the Trial Division in which the sole question concerning which there has been, during argument of the appeal, any real attack on the judgment appealed from is the meaning of the definition of the word “farming” in subsection 139(1) of the Income Tax Act, RSC 1952, c 148, which reads as follows:

(p) “farming” includes tillage of the soil, livestock raising or exhibiting, maintaining of horses for racing, raising of poultry, fur farming, dairy farming, fruit growing and the keeping of bees, but does not include an office or employment under a person engaged in the business of farming;

More particularly, recognizing that what is being described is a business, and, therefore, a profit-making operation of some kind, the only question to be decided in this Court is whether the words “maintaining of horses for racing”, in their context in this definition, refer to

(a) the business of having horses “for racing”, which would include, at a minimum,

(i) racing such horses,

(ii) maintaining, including training, the horses when they are not racing, and

(iii) collecting the fruits of the racing,* [1] or

(b) the business of maintaining, for a fee, of horses that other persons have for racing.

The problem arises because, while the partnership of which the appellant was a member and similar small operators, were in the business of racing horses in the hope of realizing a profit from such racing, the operation of maintaining and training their horses between races was carried on, on their behalf, by independent contractors for a daily fee per horse; and the appellant says that such an independent contractor did, and the small operator did not, carry on the business of “maintaining of horses for racing” so that the independent contractor did, and the small racing operator did not, carry on the business of “farming” within the statutory definition. If the appellant is right in this contention, section 13 of the Income Tax Act did not apply to him and the appeal succeeds. If the appellant is wrong in this contention, section 13 applies to him and the appeal fails.

If one were to look only at the definition of “farming” in the English version of the statute, it would be clear in my mind that the words “maintaining of horses for racing” were intended to apply not only to what is commonly thought of as the operation of a racing stable but also to the less pretentious business operations consisting of racing horses in circumstances where the businessman does not have his own stable and pasture premises and staff of “boys” and trainers but contracts out the actual care and training of the horses. This would seem to follow from the context of the definition where expressions such as ‘“tillage of the soil”, “raising of poultry” and ‘the keeping of bees” are obviously used, in each case, to refer to the whole gamut of operations constituting the particular class of buiness succinctly described by the words commonly used to describe it.

This view of the matter would seem to be supported by the fact that the apparent objects of section 13 (control of deduction of losses by “gentlemen” farmers) and of section 42 (averaging of losses sustained by farmers), the two sections of the Income Tax Act where the word “farming” is a key word, would seem to have special relevance to the business of “racing” but to have no special relevance to the business of looking after horses for a fee whether or not they are horses used only for “racing” or are used for some other purpose such as riding, jumping, exhibition, etc.

For the above reasons I would, therefore, agree with the judgment delivered by the learned trial judge on the only arguments that seem to have been presented to him.

In this Court, however, a further argument was canvassed, namely, that, when the definition of “farming” in the French version of the statute, which is “equally authentic’, is canvassed, the narrower view of the effect of the definition must be accepted.

The French version of “farming” reads as follows:

p) agriculture comprend la culture du sol, l’élevage ou l’exposition d’animaux de ferme, l’entretien de chevaux de course, l’élevage de la volaille, l’élevage des animaux à fourrure, la production laitière, la fructiculture et l’apiculture, mais ne comprend pas une charge ou un emploi auprès d’une personne se livrant à une entreprise agricole;

Here it is found that the words used in place of “maintaining of horses for racing” are “l’entretien de chevaux de course” which, freely translated into English, means “care of race horses” and is not susceptible of all the different senses of the English words, to which can be attributed the idea of “having or keeping” horses “for racing” but point rather directly to what is done in this case by the independent contractor, namely, taking care of “racing horses” and maintaining them in proper shape.

Under the Official Languages Act, RSC 1970, c O-2, what we are directed to do, in such circumstances, is to have regard to both versions “so that . . . the like effect is given to the enactment in every part of Canada” (paragraph 8(2)(a), RSC 1970, c O-2).

Having regard to the overall scheme of the legislation, I have come to the conclusion, not without considerable doubt, that the words, in both the English and French versions, must be given the larger, rather than the more restricted, sense, indicated above. What was being done throughout the definition of “farming” was the adoption of short “tags” to indicate different types of operations. Most of the “tags” adopted were well known expressions indicating specific types of business operations. For the particular operation under consideration, there was apparently no well known tag sufficiently wide to embrace everything Parliament had in mind. It may be that neither the English version nor the French version adopted in the definition is as apt as it might be to describe what was, as =l understand it, intended. Recognizing, however, that what was being attempted was an attempt at the creation of a tag, and having in mind the objectives intended by sections 13 and 42, which we are by section 11 of the Interpretation Act required to do, it seems to me that the business of the businessman engaged in “racing” is what Parliament was trying to describe rather than the more stable operations of the businessman who normally performs service for a fee. I do not see the same reason in the latter case for limiting what is deductible for losses or for permitting “averaging” of incomes over a period of years.

I also wish to say that I concur with the reasons of my brother Pratte, which, in my view, are in no way inconsistent with the views that I have expressed.

I conclude, therefore, that the appeal must be dismissed with costs.

Pratte, J (concurred in by Hyde, DJ):—This is an appeal from a judgment of the Trial Division setting aside a decision of the Tax Review Board and restoring the assessments made by the Minister of National Revenue of the income tax payable by the appellant for the taxation years 1965, 1966, 1967 and 1968. Those assessments were made on the basis that the appellant was precluded by section 13 of the Income Tax Act from deducting, in computing his income for the years in question, the whole of the losses that he had incurred as a partner in the firm “Fleur de Lys Stable Reg’d”.

It Is common ground that the appellant’s chief source of income was “neither farming nor a combination of farming and some other source of income”. The sole question raised by this appeal relates to the. characterization of business carried on by the partnership “Fleur de Lys Stable Reg’d”. If that business was “farming” the assessments were correctly made and the appeal must fail; if it was not “farming”’ the appeal must succeed since, in that case, section 13 did not apply to the appellant.

Paragraph 139(1)(p) contains a definition of the word “farming”:

139. (1) In this Act,

(p) “farming” includes tillage of the soil, livestock raising or exhibiting, maintaining of horses for racing, raising of poultry, fur farming, dairy farming, fruit growing and the keeping of bees, but does not include an office or employment under a person engaged in the business of farming;

It is clear from the evidence that, from 1965 to 1968, the partnership “Fleur de Lys Stable Reg’d” carried on a business which consisted in the acquisition, the sale and the racing of race horses. The evidence also discloses that as the partnership did not have any land or stable, it entrusted its race horses to an independent contractor who, for a daily fee, boarded them and took care of them.

The trial judge found that the partnership had, as an integral part of its business, maintained horses for racing and, for that reason, he held that the business of the partnership fell within the definition of farming contained in paragraph 139(1)(p).

At the hearing. of the appeal, counsel for the appellant did not seriously challenge the finding of the trial judge that the horses of the partnership had been maintained for the purpose of racing. His main contention, and the only one that deserves consideration, was that the trial judge had erred in inferring that the partnership was engaged in “farming” from the fact that it owned horses maintained for purposes of racing. When the Income Tax Act defines the word “farming”, counsel said, it defines a source of income. It follows, according to him, that the various activities that are mentioned in the definition must be envisaged as sources of income. Counsel argued that if the definition found in paragraph 139(1)(p) is read in the light of these considerations it becomes clear that the expression “maintaining of horses for racing” does not refer to the activity of the person who keeps race horses for the purpose of racing but refers exclusively to the business of the independent contractor who, for a fee, takes. care of horses that other persons have for racing, since it is only in the latter case that the maintenance of the horses may be a source of income.

Logical as this argument may appear, it loses all its force, in my view, when consideration is given to the object of the definition found in paragraph 139(1)(p) and when the expression ‘maintaining of horses for racing” is read in its context in that definition. It then becomes clear, in my view, that that expression refers to the business of having horses for racing and not to the business of maintaining, for a fee, horses that other persons have for racing.

The object of the definition of “farming” is to determine the sphere of application of the sections of the Act which contain rules relating to farming, namely, section 13 and section 42. Section 13 limits the amount by which a taxpayer’s income may be reduced by losses suffered as a result of his carrying on farming operations as a secondary source of income. It seems reasonable to apply this provision to the person who has horses for racing whether or not he falls in the class of a person sometimes referred to as a geniieman-farmer: there would not, however, seem to be any reason why that provision should apply to the person who, as a secondary source of income operates a-separate business consisting exclusively. of looking. after horses for a fee. Under section 42, the taxpayer whose chief source of income is either farming or fishing is given the privilege of averaging his income over 5 year periods instead of paying tax on an annual basis like other taxpayers. It seems sensible to extend that privilege to the person whose chief source of income is the business of having horses for racing; there would not seem to be any reason to extend it to the taxpayer whose chief sourse of income is the business of boarding horses for a fee. If the expression “maintaining of horses for racing” had the narrow meaning proposed by the appellant, sections 13 and 42 would, in my view, apply to situations that those sections were obviously not meant to cover, and they would not apply to other situations that they were probably intended to regulate.

The fact remains, however, that the expression “maintaining of horses for racing” (as well as its French counterpart: "l’entretien de chevaux de course”) is not as apt as it might be to describe the business of the person who keeps or has horses for racing. This anomaly, however, is easily explained if that expression is read in its context. The definition of “farming” contains an enumeration of various expressions designating business operations. Most of those expressions (such as “livestock raising”, “raising of poultry”, “fruit growing”, ‘‘the keeping of bees”), in their literal sense, designate activities which are not sources of income except as part of some profit-making operation. The use of those expressions in the definition does not, in most cases, create any difficulty because most of these expressions are well known and, in everyday language, are used to designate types of businesses in the operation of which the activities mentioned play a predominant role. The business consisting of having race horses, of maintaining and training them, of racing them and collecting purses, is‘perhaps not as common as that of “livestock raising” and, for that reason, it may be that the phrase that has been used is not an expression well known in the racing world to describe it in the same way as the expressions used in respect of the other types of businesses mentioned in the definition are known in their respective spheres.

For these reasons I would dismiss the appeal with costs.