Citation: 2006TCC483
Date: 20060907
Docket: 2004-3802(IT)G
BETWEEN:
DENIS MORISSET,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
[OFFICIAL ENGLISH TRANSLATION]
REASONS FOR JUDGMENT
Lamarre J.
[1] The Appellant
practices chiropractic as a profession and is the sole shareholder of Centre
chiropratique Morisset Inc. ("the Centre"). During the 2000 and 2001
taxation years, he did not report income from his practice of chiropractic on
his personal income tax returns. Rather, he reported all his chiropractic
income and other income on the Centre's income tax return. The Minister of
National Revenue ("the Minister") reassessed the Appellant for
both years to include the income from the practice of chiropractic in his
personal income; to make the necessary adjustments to the expenses; and to
include, in his personal income, the amounts derived by him in his capacity as
shareholder.
[2] The Appellant
states that he performs chiropractic adjustments for about one hour per week.
[3] He says that he is
at the Centre on Tuesday and Friday mornings. Otherwise, he is available
for consultation at any time. Most of his time is devoted to equipment repairs
and electronics, and to the maintenance of the Centre. He works with his
spouse, who also practices chiropractic, as well as a physical education
professional and two other employees (Secondary V students) whom he has
trained. Ninety percent of the
Centre's clients are employees of companies that have contracts with the
Appellant, under which he provides chiropractic care to their employees, but
also promotes prevention in the workplace by developing a physical exercise
program. Ten percent of the clients register with the Centre for training and
do not have medical problems. All of the Centre’s clients receive a health
card that is used to record their number of visits to the Centre. The Centre
bills employers directly, or bills insurance companies or the workers'
compensation board (the "CSST") directly for employees covered by a
plan offered by these institutions. Generally, a flat fee is charged, and the
employee can visit the Centre for training as often as desired. Certain
organizations are billed a lump sum which covers chiropractic adjustments and
the training offered by the Centre. Other organizations, such as the CSST,
request itemized billing of the cost of adjustments and the cost of visits to
the Centre. The Centre's computer system does not distinguish between income
from the actual practice of chiropractic and income from visits to the Centre
for physical training.
[4] The Minister
refused to include chiropractic income — which includes plans
that encompass a preliminary examination for chiropractic care as well as
unlimited access to the Centre — in the Centre's income. Relying on
the Chiropractic Act, R.S.Q., chapter C‑16, and on the
Code of Ethics of Chiropractors, R.Q., c. C-16, r.2, the Respondent
submits that a chiropractic professional’s fees cannot be shared with a person
who is not a member of the Ordre des chiropraticiens du Québec.
However, the Appellant argues that in addition to adjustments,
chiropractic includes the whole preventive aspect of physical training at the
Centre. On this basis, the Minister determined that all income from
operating the Centre should be included in the Appellant's income. The
Appellant challenges this finding.
[5] It should also be
noted that upon including the income derived from the operation of the Centre,
and from the actual practice of chiropractic, in the Appellant's income, the
Minister allowed the Appellant the associated eligible expenses. Since the Centre
owns the building that contains all the equipment needed to operate the clinic
and sports centre, and the building also contains residential rental units,
only the rental income was included in the Centre's income. The Centre paid the
Appellant a salary for repair work on the building. This salary was considered
an expense of the Centre. The taxes and permits related to the practice of
chiropractic were deducted from the Appellant's income, while the total claimed
for this expense item was deducted from the Centre's income. Thus, at tabs 6
and 7 of Exhibit I‑1, where the Minister allocates all expenses
between the Centre and the Appellant, the Minister allocates to the Centre only
expenses related to the rental of the building, and to the Appellant all
expenses related to the practice of chiropractic, including the operation of
the Centre.
[6] Adjustments were
made during the audit and can be found at tabs 11 and 12 of
Exhibit A‑1. Thus, unexplained or unsubstantiated salaries were
disallowed, along with personal and unsubstantiated expenses. A 50% share of
meals and lodging expenses was accepted under the Income Tax Act
("the Act").
[7] In addition, the
Minister included in the Appellant's income, as a benefit conferred on a
shareholder, amounts paid by the Centre for the Appellant's personal benefit.
These amounts can be found at tab 5 of Exhibit A‑1 and consist
of premiums paid for life insurance for the Appellant (tabs 15 to 17),
unreported bonuses (tab 13) and personal expenses (tab 24). The personal
expenses included expenses paid by the Centre for a motor vehicle owned
exclusively by the Appellant. However, the Appellant was allowed to deduct
travel expenses, including wear and tear. The shareholder benefit also includes
all expenses charged to the Appellant's credit card and paid by the Centre
using an unexplained residual balance (for example, see tab 22). However,
the Appellant was permitted to deduct substantiated travel and management
expenses (tabs 25 and 26, Exhibit A-1).
[8] The Appellant did
not really challenge the treatment of these expenses, and he did not adduce any
evidence to contradict the Minister on this point.
[9] The crux of the
matter is the computation of the income from the practice of chiropractic and
the operation of the Centre.
[10] The Respondent
submits that only a member of the Ordre des chiropraticiens may
practice chiropractic. In this regard, the Respondent relies on the following
legislation:
R.S.Q.,
chapter C-16
CHIROPRACTIC
ACT
DIVISION
1
DEFINITIONS
1. In this Act and the regulations made thereunder,
unless the context indicates a different meaning, the following terms mean:
...
(c) "chiropractor" or
"member of the Order": any person entered on the roll;
...
(e) "roll": the list of
the members in good standing of the Order prepared in accordance with the
Professional Code ...
...
PRACTICE OF CHIROPRACTIC
6. Every act the object of which is to make corrections
of the spinal column, pelvic bones or other joints of the human body, by use of
the hands, constitutes the practice of chiropractic.
Chiropractic treatment.
7. A chiropractor may determine by clinical and
radiological examination of the spinal column, pelvic bones and other joints of
the human body, the chiropractic treatment indicated.
...
10. No person may practise chiropractic under a name
other than his own.
...
CODE OF ETHICS OF CHIROPRACTORS, c. C-16, r. 2
...
3.05.05. The chiropractor must refrain
from sharing his fees with a person who is not a member of the Order or from remitting
such fees to him.
...
R.S.Q., chapter C-26
PROFESSIONAL CODE
...
32. No person shall claim in any manner to be … [a]
chiropractor, ... or use one of the above titles or any other title or
abbreviation which may lead to the belief that he is one, or initials which may
lead to the belief that he is one, or engage in a professional activity
reserved to the members of a professional order, claim to have the right to do
so or act in such a way as to lead to the belief that he is authorized to do so,
unless he holds a valid, appropriate permit and is entered on the roll of the
order empowered to issue the permit, unless it is allowed by law.
...
Code of ethics.
87. The Bureau must make, by regulation, a code of
ethics governing the general and special duties of the professional towards the
public, his clients and his profession, particularly the duty to discharge his
professional obligations with integrity. Such code must contain, inter alia:
1) provisions determining which acts are
derogatory to the dignity of the profession;
2) provisions defining, if applicable,
the professions, trades, industries, businesses, offices or duties incompatible
with the dignity or practice of the profession;
...
[11] Counsel for the
Respondent submits that the Centre cannot bill for the professional acts of the
Appellant. She cites Lebel c. Pharmacentres Cumberland (Merivale) Ltée,
[2002] Q.J. No. 4595 (C.A.Q.), where two pharmacists complained to the Syndic
of the Ordre des pharmaciens about charges levied by "Cumberland",
a non-pharmacist, on fees or profit resulting from the sale of medicines, in
contravention of the Code of Ethics of Pharmacists, which reads in
relevant part:
DUTIES AND OBLIGATIONS
TOWARDS THE PROFESSION
§1 Derogatory
acts
4.01.01. In
addition to those referred to in sections 57 and 58 of the Professional Code
(R.S.Q., c. C-26), the following acts are derogatory to the dignity of the
profession of pharmacist:
...
(t) sharing his fees
or the profit resulting from the sale of medicines with a person who is not a
pharmacist;
[12] The Quebec Court of
Appeal made the following comments at paragraphs 16 to 20:
[TRANSLATION]
¶ 16 That
being said, the trial judge properly found that under the contractual structure
created trial by Cumberland, the pharmacists are sharing their fees (or profit)
with the franchisor in contravention of their Code of Ethics. The trial judge
wrote:
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|
[TRANSLATION]
The Court is of the view
that Cumberland implemented a structure or system that made it possible to
circumvent the law because, as we shall see, the evidence does not show that
the charges collected pursuant to the franchise contract reflect the fair
market value of the services actually provided by the franchisor.
|
|
¶ 17
Section 4.01.01(t) of the Code of Ethics of Pharmacists, which prohibits
pharmacists from sharing their fees or profit with non-pharmacists, is
undeniably of public order [see Note 3 below]. It was adopted in accordance
with section 87 of the Professional Code [see Note 4 below]:
Note 3: Robert
Laforce Inc. v Bellemare, [1989] Q.J.. No. 874
(C.A.) (QL); Marie-France Bich, "Le professionnel salarié : considérations
civiles et déontologiques", in Journées Maximilien-Caron (1994)
(Montréal: Themis, 1994), at page 45; Pauzé v. Gauvin, [1954] S.C.R. 15.
Note 4: R.S.Q., c. C-26.
|
87.
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The Bureau must make, by
regulation, a code of ethics governing the general and special duties of the
professional towards the public, his clients and his profession, particularly
the duty to discharge his professional obligations with integrity. Such code
must contain, inter alia:
...
|
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¶ 18
Section 4.01.01 t) is a public order provision because, among other
things, its object is to protect the public interest in general, not pharmacists
in particular. The aim, indirectly, is to prevent non-pharmacists from becoming
owners of a pharmacy. The practice of pharmacy is directly tied to the
protection of human life and health. As a general principle, legislation
regarding professional bodies is of public order [see Note 5 below]:
Note 5: J.-L. Baudouin, Les
obligations, 4th ed. (Cowansville: Yvon Blais, 1993), at pages 79-81.
|
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Thus, legislation
regarding the administration of justice or the organization of the state, as
well as administrative and fiscal laws and laws regarding the organization of
professional bodies, is of public order.... The parties cannot circumvent or
contract out of it, and a contract purporting to do so is absolutely null.
|
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¶ 19 Therefore,
the trial judge correctly stated:
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[TRANSLATION]
The Court is of the view
that the provision in issue goes beyond the strictly private interest of the
pharmacist or the mere contractual relationship between a pharmacist and his
or her client. It is a protective measure that is far broader in scope and
concerns the integrity of the profession and the protection of the public.
|
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¶ 20 Therefore,
we find that the trial judge made no error of law and no error of mixed law and
fact in determining that the part of clauses 3.1.17 and 10.2 of the franchise
contract which pertains to the revenues collected by the owners of the pharmacy
as fees or profits is null.
[13] In the instant case,
the Chiropractic Act provides that "every act the object of which
is to make corrections of the spinal column, pelvic bones or other joints of
the human body, by use of the hands, constitutes the practice of
chiropractic."
[14] The Ordre des
chiropraticiens du Québec's web site provides a general description of a
chiropractor's area of practice. I shall set out a few excerpts from this
description:
[TRANSLATION]
GENERAL
DESCRIPTION OF
A
CHIROPRACTOR'S AREA OF PRACTICE
...
4. A chiropractor performs and prescribes
tests, examinations and analyses of the patient's state of health to assess the
appropriateness and efficacy of the chiropractor’s treatment or in connection
with the chiropractor’s illness prevention program. In addition, a chiropractor
is required to carry out any periodic monitoring and reassessment exams that
are needed to determine the progress being made by the patient under his care
and to keep the chiropractor’s knowledge of each patient up to date.
...
7. A chiropractor provides, or arranges
for others to provide, various forms of physical therapy intended to complete
and optimize the effects of chiropractic treatments. For example, these include
the use of traction, diathermy, galvanic currents, infrared or ultraviolet
rays, ultrasound, massage, paraffin baths, hot and cold wraps, meridian
therapy, braces and casts.
...
8. A chiropractor advises patients on
their lifestyle, mental attitude, emotional life, safety, working conditions
and leisure. The chiropractor advises on any other day-to-day activities that
could positively or negatively affect the efficacy of chiropractic treatment.
It is important to note that chiropractic care is based on a holistic,
comprehensive approach of the patient and influences the patient's health
(physical, mental and social), well-being and vitality.
9. A chiropractor advises professionals
concerned with the workplace, or with the prevention of accidents on duty or
work-related illnesses, or the prevention of traffic accidents, and performs
assessments in connection with these matters.
...
12. A chiropractor may have a general practice
or specialize in the treatment of certain types of problems or patients. For
example, a chiropractor may focus on the care of children or the elderly, or on
work-related illnesses, sports injuries or employment-related health problems.
Some chiropractors devote their practice to the treatment of specific types of
health problems, while others focus on the treatment of musculoskeletal
disorders.
...
... A chiropractor, also known as a
doctor of chiropractic, may practice alone or in a partnership or may be
employed by one or more chiropractors.
[15] The evidence shows
that the Appellant offers his services through the Centre to various
organizations. In particular, the Appellant filed Exhibit A‑2, which
consists of various sample contracts in which the Appellant agrees to offer
Centre memberships to employees of various businesses for a set fee that the
employees themselves must pay. In the same contracts, the employer agrees to
pay the costs of assessing the employees' physical condition, including a
posture assessment and a training program for a specific fee stated therein.
(For example, see the contract between the Mitis health and community services
centre and the Morisset Centre.)
[16] These contracts show
that the Appellant clearly distinguishes between the fees charged by the Centre
for a quarterly or annual membership and the fees related to the practice of
chiropractic. The problem here is that the Appellant did not break down
the income according to each of these sources.
[17] In my opinion, the
Respondent's desire to include the income derived from the practice of
chiropractic (including everything related to the training program) in the
Appellant's income is well founded, because the Appellant is not allowed to
bill through the Centre. However, the income from Centre memberships does not
form part of the income from the actual practice of chiropractic.
[18] The Appellant said
that 10% of the Centre's clients have no medical problem. He said that, on
average, he devotes two mornings per week to chiropractic counselling or back
adjustments. However, he is available at any time. According to the information
on the health card (photocopied in Exhibit A‑2), the Centre is open
Monday to Friday from 6 a.m. to 9 p.m. and Saturday from 9 a.m.
to noon, for a total of 78 hours per week. The office is open three days
per week for six hours each day, for a total of 18 hours per week. Thus,
I find that the Appellant offers chiropractic services 23% of the time for
90% of his clients.
[19] Since these are the
only figures available to me, I estimate that 20% of the Centre's income is
from the practice of chiropractic and must be included in the Appellant's
income.
[20] The appeal is
therefore allowed on the basis that the Appellant must include in his income
only 20% of the chiropractic income that the Minister attributed to him in the
assessments under appeal, which income is set out in paragraph 21 and
Appendices 2 and 4 to the Reply to the Notice of Appeal. The expenses that the
Appellant was allowed, under the said assessments, to deduct from chiropractic
income, shall be adjusted in the same proportion.
[21] The amounts added to
the Appellant's income as a benefit conferred on a shareholder, and the
expenses disallowed by the said assessments, shall remain unchanged.
Signed at Ottawa, Canada, this 7th day of September 2006.
"Lucie Lamarre"
Translation
certified true
on this 29th day
of January 2008.
François Brunet,
Revisor
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