Gillespie v. The Queen, 82 DTC 6334, [1982] CTC 378 (FCA)

Thurlow, CJ:—This is an appeal from a judgment of the Trial Division which allowed with costs an appeal by the Crown from a judgment of the Tax Review Board and held the appellant not entitled to a deduction in respect of child care expenses which he had claimed in computing his income for tax purposes for the 1976 taxation year. As the deduction claimed was but $170 and the tax in controversy was even less and thus far below the $2,500 referred to in subsection 178(2)* [1] of the Income Tax Act the award of costs against the respondent was plainly erroneous and instead the judgment should have ordered the Minister of National Revenue to pay all reasonable and proper costs of the taxpayer in connection with the appeal to the Trial Division. On that issue, which was not contested by the Crown, the present appeal must accordingly succeed.

The other issue, that of the entitlement of the appellant to the child care deduction claimed by him, turns on the interpretation of section 63 and, more particularly, subsection 63(4) of the Act. The section provides in subsection (1) for such deductions by

(a) a woman,

(b) a man who is not married or

(c) a married man who is separated from his wife or whose wife is disabled for any one of certain specified reasons from caring for a child.

In subsection (2) limits are placed on the amounts of such expenses that may be deducted where the taxpayer is a man and where the taxpayer is a wife who is disabled for any of the specified reasons from caring for a child. By subsection (3) which defines “child care expense’’, further limitations are provided in the form of qualifying conditions, among which are that

(i) “the child was, during the year, ordinarily in the custody of the taxpayer” and

(ii) that the child care services were provided to enable the taxpayer, in effect, to engage in income earning activities.

In this context subsection 63(4) provides:

(4) For the purposes of this section, it shall be assumed that a child of a woman and a man who were living together without being married to each other was ordinarily in the custody of the woman and not in the custody of the man.

It may be noted at this point that the expression “ordinarily in the custody of” in this subsection is the same as that in subparagraph 63(3)(a)(i) forming part of the statutory definition of “child care expense”.

Both in the Tax Review Board and in the Trial Division the appeals were dealt with on the basis of an agreed statement of facts. The statement in the Trial Division read as follows:

1. At all material times the Defendant was not married.

2. During the 1976 taxation year the Defendant paid amounts to a total of $170.00 as child care expenses in respect of his child, and payment of the said amounts was duly proven by filing appropriate receipts with the Minister.

3. The aggregate of the amounts so paid did not exceed 2/3 of the Defendant’s earned income for the said year.

4. During the 1976 taxation year, the Defendant’s child was ordinarily in the custody of the Defendant and ordinarily in the custody of the mother of the child, and was under the age of 14 years.

5. The said expenses were incurred by the Defendant for the purpose of providing in Canada, for his child, day nursery services to enable the Defendant to carry on a business.

6. The services were provided by a resident of Canada other than a person described in paragraphs 63(3)(a)(iii)(A) or (B) and the expenses did not come within the exceptions in paragraphs 63(3)(a)(iv) or (v) of the Income Tax Act.

7. At all material times the Defendant and the mother of the child were living together.

8. In assessing the Defendant for his 1976 taxation year the Minister of National Revenue disallowed the deduction by the Defendant of the said expenses.

The interpretation of subsection 63(4) adopted by the Tax Review Board appears from the following excerpt from the reasons of the Vice Chairman, Mr Dubrule:

As I view section 63, excluding subsection (4) thereof, the appellant clearly would be able to deduct the child care expenses he incurred as the Crown says only that subsection (4) precludes him from doing so. It precludes him from doing so as that subsection shall be interpreted as “deeming” the child of this relationship to be in the custody of the mother. It is conclusively presumed that that mother has custody of that child and that the father, regardless of the facts he can adduce, cannot show, nor can one in my position find, that he does for this subsection have custody.

With respect, I disagree. I cannot interpret that subsection, epecially when one considers the words “assumed” and “ordinarily” and the phrase “and not in the custody of the man” as all adding up to mean deemed. As I read the subsection, it is advising a man who is living with a woman and their child that the Minister of National Revenue, when he assesses that man’s income tax return with reference to a claim under section 63, is going to assess on the basis that that mother and not that man has custody of that child and it is up to that man to show that he has custody. To conclude that “assumed” means “deemed” has the effect of making the word “ordinarily” and the phrase “and not in the custody of the man” meaning- less. I am sure Parliament did not put words in that subsection intending that they have no meaning.

In light of the agreement as to the facts, especially paragraphs 6 and 7 of the Agreed Statement of Facts and the portions of the submissions I have quoted, having found that section 63(4) is only a rebuttable presumption, judgment will go allowing the appellant’s appeal and remitting the assessment to the respondent for reassessment to allow child care expenses in the amount of $170.00.

In reversing this decision the learned trial judge, after setting out the facts and portions of section 63, said:

The interpretation of section 63(4) therefore becomes all important.

I find it significant that the section commence, “For the purposes of this section it shall be assumed that a child . .. was ordinarily in the custody of a woman . . (italics added)

He then discussed section 28 of the Interpretation Act and expressed the view that “shall” as used in subsection 63(4) is imperative. He continued:

An assumption without any qualifying provision is normally subject to rebuttal on valid supporting evidence; and there are even provisions in enactments which specifically provide that what would otherwise be an irrebuttable assumption may be negatived if the contrary is established. An example of this is found in sec 109(3) of the Act, which reads:

“(3) Dependent child. For the purpose of the deduction for a child under paragraph 1(d), it shall be assumed, unless the contrary is established, that an illegitimate child was wholly dependent on his mother and that any other child was wholly dependent on his father.” (italics added)

Here you find specific provision that the otherwise irrebuttable assumption may be rebutted if the contrary is established. No such provision exists in sec 63(4).

I referred earlier to the fact that sec 63(4) commences with the words “For the purposes of this section it shall be assumed”. Because this section deals basically with the issue of custody, it appears to me to require that custody should be strictly interpreted in conformity with the provisions of the section. So that while in the Agreed Statement of Facts it is agreed that the child was ordinarily in the custody of the father and ordinarily in the custody of the mother, which I take to be joint custody, I do not accept that for the purposes of this section custody is vested in the father. Joint custody, and custody as envisaged by the Act are entirely different.

I have no hesitation in holding that coupling the words “For the purposes of this section” with the imperative “shall” creates an irrebuttable assumption that the child was ordinarily in the custody of the mother and only she could claim deduction for child care expenses.

Having so found, I consider it unnecessary to deal with the terms “ordinarily” or the final words of the section, “and not in the custody of the father”.

If these had required comment, I would have held that “ordinarily” is simply another term for “usually” or “normally”. I find nothing unusual or out of the ordinary in the situation existing in the within case and the normal and ordinary cases of unmarried parents of a child living together. I am convinced it is precisely the situation intended to be covered by sec 63(4) to make clear that custody was with the mother of the child.

The words “and not the father” simply emphasize the intent of the section that the mother and not the father is irrevocably assumed to have custody.

With respect I do not think the subsection can be treated or interpreted as being in the nature of advice to a taxpayer as to the course to be adopted by the Minister in assessing tax until the contrary is shown as held by the learned vice-chairman. Nor do I adopt the appellant’s submission that the word “assumed” in subsection 63(4) means or refers to assumptions made by the Minister in the process of assessing tax. See R W S Johnston v MNR, [1948] SCR 486; [1948] CTC 195; 3 DTC 1182, per Rand J at page 489.

Moreover, I do not find it persuasive, or even helpful, in construing subsection 63(4) to contrast the word “assumed” either with the word “deemed” as found in section 63.1 and other provisions of the Act or with the expression “assumed, unless the contrary is established” in subsection 109(3). Further, with respect, I do not regard it as significant, as did the learned trial judge, that subsection 63(4) commences with the imperative expression “For the purposes of this section it shall be assumed that . .

Nor do I think that the custody of his child by a taxpayer otherwise entitled to a deduction would be insufficient for the purposes of the section merely by reason of the fact that the child was ordinarily in the joint custody of the taxpayer and his wife or of the taxpayer and the child’s mother.

I should also note that I do not think that assistance in interpreting subsection 63(4) is to be obtained by speculating on what Parliament may have intended or not intended or seeking to draw a conclusion from such speculations. Whatever interpretation is given to the words, results will flow that some may consider absurd and unintended.

In my view, the ordinary and natural meaning of the expression “it shall be assumed” in its context in subsection 63(4) is “it shall be taken for granted”. This accords with the meaning of “assumed’ to be found in the Shorter Oxford Dictionary, and of “assume” in The Living Webster Encyclopedic Dictionary.

In the French language version of subsection 63(4) the corresponding expression used is “il doit être supposé”. Le Dictionnaire Quillet de la Langue Française gives as the first meaning of the adjective “supposé” — “Donné comme vrai quoique faux”, and of the verb “supposer” — “Poser une chose pour établie, afin d’en tirer ensuite les conséquences”.

Even with these meanings it is, I think, possible for the English word “assumed” and the French word “supposé” to be used either in an absolute or in a rebuttable sense. But having regard for the purpose of subsection 63(4) and its context in the section it seems to me that the words are used in an absolute and irrebuttable sense. The purpose of the subsection appears to me to be to resolve once and for all for the purposes of section 63, that is to say, for the purpose of determining entitlement to child care deduction, which of the two persons referred to, both of whom might otherwise qualify, is to be regarded as the person entitled. The subsection does this by not merely preferring the mother but by going on to exclude the father. It seems to me that this interpretation harmonizes with and falls within the general intention which appears from the other subsections to give the right to the deduction to the mother except in the particular situations in which the father is given the right, all of which are situations in which, for one reason or another, the mother would not have a claim. In the case contemplated by paragraph 63(2)(b) in which both the father and mother might otherwise have a claim in the same year, the father’s claim is limited to expenses incurred while the mother is incapacitated. Her claim is not limited in any similar way but is for the remainder of the annual allowable amount.

I think it is also apparent that the section contemplates a deduction for only one of the parents of a child in respect of the expense of child care ina particular period of time. Entitlement to deductions for child care for the same period by both father and mother having joint custody of the child is not mentioned and does not appear to be consistent with the limitations imposed by the section or with the separate prescription of the rights of a woman and of different rights for a man.

In the situation postulated by subsection 63(4), however, that is to say, when the unmarried father and the mother of the child are living together, joint custody by the father and mother, or conceivably sole custody by the father, may exist as a fact. But the subsection, as I read it, requires that the fact be disregarded and settles the matter by giving the deduction to the mother to the exclusion of the father thus, both in the case of joint custody and of sole custody, putting the unmarried parents who are living together for the most part on the same basis as married parents who are living together and have custody of their child. In this view, it is not open to either to rebut the statutory assumption.

Accordingly I would uphold the conclusion of the learned trial judge.

I would allow the appeal in part, set aside the part of the judgment of the Trial Division which awards costs to the respondent and in its place order the Minister of National Revenue, pursuant to subsection 178(2) of the Income Tax Act, to pay all reasonable and proper costs of the appellant in connection with the respondent’s appeal to the Trial Division. In all other respects I would dismiss the appeal. As success is divided there should be no costs of this appeal to either party.