Date: 20051028
Docket: A-521-04
Citation: 2005 FCA 354
CORAM: LINDENJ.A.
ROTHSTEIN J.A.
PELLETIER J.A.
BETWEEN:
HER MAJESTY THE QUEEN
Appellant
and
KAREN J. KLYWAK
Respondent
REASONS FOR JUDGMENT
LINDEN J.A.
[1] This is an appeal by the Crown from the judgment of the Tax Court of Canada, dated August 13, 2004 (reported as (2004) 5 C.T.C. 2220, 2004 TCC 523), concerning the deductibility by the taxpayer, who suffers from fibromyalgia, of the cost of a hot tub as a medical expense tax credit (METC). The main legal issue is whether the hot tub is a "device that is designed to assist an individual in walking where the individual has a mobility impairment", pursuant to section 118.2(2)(m)(i) of the Income Tax Act and paragraph 5700(i) of the Regulations, which read as follows:
118.2 (2) For the purposes of subsection 118.2(1), a medical expense of an individual is an amount paid ...
(i) [devices] -- for or in respect of an artificial limb, iron lung, rocking bed for poliomyelitis victims, wheel chair, crutches, spinal brace, brace for a limb, iliostomy or colostomy pad, truss for hernia, artificial eye, laryngeal speaking aid, aid to hearing or artificial kidney machine, for the patient;
. . .
(m) [prescribed in regulations] - for any device or equipment for use by the patient that
(i) is of a prescribed kind,
(ii) is prescribed by a medical practitioner,
(iii) is not described in any other paragraph of this subsection, and
(iv) meets such conditions as are prescribed as to its use or the reason for its acquisition;
to the extent that the amount so paid does not exceed the amount, if any, prescribed in respect of the device or equipment;
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118.2 2) Pour l'application du paragraphe (1), les frais médicaux d'un particulier sont les frais payés:...
(i) [dispositifs] -- au titre d'un membre artificiel, d'un poumon d'acier, d'un lit berceur pour les personnes atteintes de poliomyélite, d'un fauteuil roulant, de béquilles, d'un corset dorsal, d'un appareil orthopédique pour un membre, d'un tampon d'iliostomie ou de colostomie, d'un bandage herniaire, d'un oeil artificiel, d'un appareil de prothèse vocale ou auditive ou d'un rein artificiel, pour le particulier, son époux ou conjoint de fait ou une personne à charge visée à l'alinéa a);
. . .
m) [dispositif visé par règlement] -pour tout dispositif ou équipement destiné à être utilisé par le particulier, par son époux ou conjoint de fait ou par une personne à charge visée à l'alinéa a) et qui répond aux conditions suivantes, dans la mesure où le montant payé ne dépasse pas le montant fixé par règlement, le cas échéant, relativement au dispositif ou à l'équipement:
(i) il est d'un genre visé par règlement,
(ii) il est utilisé sur ordonnance d'un médecin,
(iii) il n'est pas visé à un autre alinéa du présent paragraphe,
(iv) il répond aux conditions prescrites quant à son utilisation ou à la raison de son acquisition;
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5700. For the purposes of paragraph 118.2(2)(m) of the Act, a device or equipment is prescribed if it is a
. . .
(i) device that is designed to assist an individual in walking where the individual has a mobility impairment;
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5700. Les dispositifs ou équipements suivants sont prescrits pour l'application de l'alinéa 118.2(2)m) de la Loi :
. . .
i) tout dispositif qui est conçu à l'intention du particulier à mobilité réduite pour l'aider à marcher;
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[2] The issue raised in the appellant's Memorandum of Fact and Law about whether this hot tub was "prescribed by a medical practitioner" has been abandoned by the appellant. An alternative argument that was advanced by the taxpayer claiming the expense as "renovations or alterations" under section 118.2(l.2) need not be considered in view of our decision on the main issue.
[3] As this case concerns an appeal from a lower court, the standard of review falls to be determined according to the principles set out in Housen v. Nikocaisen, [2002] 2 S.C.R. 235 (Housen). Pursuant to Housen, the standard of review is correctness for questions of law, and palpable and overriding error for findings of fact or inferences of fact. When the issue involves a question of mixed law and fact, it will be reviewed on the standard of palpable and overriding error, unless a legal principle upon which the lower court erred can be readily extricated, in which case such error may amount to an error of law.
[4] The Tax Court Judge, after a hearing under the informal procedure, found on the facts as he found them to be in this case, that the hot tub "was, in these circumstances, designed, in part at least, for a therapeutic purpose assisting the appellant in walking, her fibromyalgia having produced a mobility impairment" (at para. 12). This is a finding of mixed fact and law, "involv[ing] the trial judge's interpretation of the evidence as a whole" and in which "the legal principle is not readily extricable" (Housen, at para. 36). I can see no palpable or overriding error in this determination.
[5] While there have been several conflicting decisions in the Tax Court of Canada concerning METC claims for hot tubs, these variations are dependant on the particular facts as found in the various cases before the Court. As Associate Chief Justice Bowman (as he then was) explained in the case of Whitfield v. R., [2005] 3 C.T.C. 2116, 2004 TCC 606 at para. 17 (Whitfield):
[Where] on the evidence, the judge finds that a significant purpose and use of the hot tub is to assist the mobility of the individual, the Courts seem inclined to allow the expense.
In Whitfield Chief Justice Bowman specifically referred (at para. 17) to the Tax Court decision in this case now under appeal as one where the Tax Court Judge "made a specific finding of fact that the purpose and effect of the hot tub assisted the appellant in walking."
[6] While the evidence produced at trial was certainly not overwhelming to support this finding, considering the evidence presented and considering that the trial was conducted under the informal procedure, we cannot see any basis on the standard of palpable and overriding error for overturning that finding. Section 18.15(4) of the Tax Court of Canada Act, R.S.C. 1985, c. T-2, specifies that the court hearing an informal procedure appeal "is not bound by any legal or technical rules of evidence in conducting a hearing ..." and that all appeals "shall be dealt with by the Court as informally and expeditiously as the circumstances and considerations of fairness permit." While the medical evidence proffered in this case was rather limited and imprecise, the Tax Court Judge specifically asked the taxpayer whether the hot tub assisted her in walking, to which she responded "yes". Given that this was an informal procedure hearing and given the deferential standard of review, I see no basis upon which to interfere with this finding.
[7] In an excellent and thorough presentation, counsel for the appellant Crown, understandably seeking a bright line interpretation, made several arguments that, in the end, did not persuade the Court. The main contention of the appellant was that at law this provision can apply only to those devices that "provide direct physical support to assist an individual in walking", like canes and walkers. The Tax Court Judge opined (at para. 11), in response to this argument, that the words "'designed to assist an individual in walking' surely cannot be interpreted to refer only to mechanical external aids which, although assisting the walking function, would not assist the internal disease." I cannot disagree.
[8] The language in the section does not support the position of the Crown. The words of Regulation 5700(i) stated, inter alia, "designed to assist", not "exclusively designed" to assist. By contrast, the word "exclusively" is used in several of the other provisions in this same regulation to limit strictly the devices that are deductible. (See provisions (c), (m), (n), (o), (t), and (u).) As the word "exclusively" is not used in the provision at issue, one cannot properly conclude that the hot tub device must have been designed "exclusively" to assist in walking. It is sufficient that one of the purposes of its design is to assist in walking, which the Tax Court Judge held it was. Counsel for the Crown made a valiant attempt to have this Court write the word "exclusively" into Regulation 5700(i), but that task is reserved for Parliament, not this Court. Incidentally, it was pointed out to the Court, in argument, that there is a proposal circulating in the Department of Revenue to add the word "exclusively" to this provision so as to "clarify" its meaning. (See Stikeman, Income Tax Act Annotated, (2005) at p. 985.) When and if that amendment comes into force the argument of the Crown would be much more persuasive, but at this time I am not persuaded.
[9] The reference to this Court's decision of Gibson v. The Queen, [2002] 1 C.T.C. 147, 2001 FCA 356 (Gibson), involving another hot tub case, is no impediment to the conclusion reached by this Court in this case. Counsel for the Crown conceded, in his Memorandum of Fact and Law, that the comment (at para. 1 of the judgment in Gibson) to the effect that "the cost of the spa itself did not qualify for any medical expense credit", was merely obiter since that expense was not in issue on that appeal. This obiter statement therefore cannot bind this Court.
[10] The appeal will therefore be dismissed.
"A.M. Linden"
"I agree
Marshall Rothstein J.A."
"I agree
J.D. Denis Pelletier J.A."
FEDERAL COURT OF APPEAL
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: A-521-04
STYLE OF CAUSE: HER MAJESTY THE QUEEN v. KAREN J. KLYWAK
PLACE OF HEARING: Winnipeg, Manitoba
DATE OF HEARING: October 20, 2005
REASONS FOR JUDGMENT: Linden J.A.
CONCURRED IN BY: Rothstein J.A., Pelletier J.A.
DATED: October 28, 2005
APPEARANCES:
Mr. Perry Derksen FOR THE APPELLANT
Mr. Paul K. Grower FOR THE RESPONDENT
Mr. Dean G. Giles
SOLICITORS OF RECORD:
Mr. John H. Sims, Q.C. FOR THE APPELLANT
Deputy Attorney General of Canada
Department of Justice - Toronto
Fillmore Riley LLP FOR THE RESPONDENT
Winnipeg, Manitoba
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