Date:
20020823
Docket:
2002-710-IT-I
BETWEEN:
RHONDA
RAY,
Appellant,
and
HER MAJESTY
THE QUEEN,
Respondent.
Reasons
for Judgment
O'Connor, J.T.C.C.
[1]
The issue in this appeal is whether in the 1999 taxation year the
Appellant is entitled to deduct certain expenses as medical
expenses as defined in subsection 118.2(2) of the Income
Tax Act ("Act") and Regulation 5700 of the
Income Tax Regulations
("Regulations") in calculating her medical tax
credits in the computation of her non-refundable tax credits for
that year.
[2]
The relevant facts are adequately described in the Reply to the
Notice of Appeal as follows:
6.
In computing taxes payable for the 1999 taxation year, in a
return of income that was electronically filed by the Appellant,
the Appellant claimed a non- refundable medical expense
credit in respect of total of medical expenses in the amount of
$7,087.00.
7.
In assessing the Appellant for the 1999 taxation year, Notice of
Assessment thereof dated April 17, 2000, the Minister of National
Revenue (the "Minister") allowed a non-refundable
medical expense credit in respect of total medical expenses in
the amount of $7,087.00 as claimed by the Appellant.
8.
In reassessing the Appellant for the 1999 taxation year, Notice
of Reassessment thereof dated April 6, 2001, the Minister
disallowed medical expenses in the amount of $6,555.00 (the
"disallowed expenses").
9.
In so reassessing the Appellant, to disallow medical expenses,
the Minister made the following assumptions of fact:
(a)
those facts hereinbefore admitted;
(b)
the disallowed expenses are amounts paid by the Appellant for the
purchase of vitamins, herbs, organic and natural foods, and
bottled water;
(c)
the disallowed expenses are not amounts paid by the Appellant for
drugs or medications for use by the Appellant as prescribed by a
medical practitioner and recorded by a pharmacist;
(d)
the disallowed expenses are not medical expenses described in
subsection 118.2(2) of the Act;
(e)
the disallowed expenses are personal expenses of the
Appellant;
(f)
the Appellant is not entitled to deduct non-refundable medical
expense credit in respect of the disallowed expenses in the 1999
taxation year.
[3]
The Appellant presented as Exhibit A-1, letters and medical
certificates of Dr. Bryn Waern, Dr. M. Zazula, M.D., and
Mary O'Reilly, N.D..
Dr. Bryn
Waern stated in his letter dated February 13, 2002:
This will
verify that Ms. Ray was a patient of mine from
May '96 to Sept. '97. She was being treated for
Chronic Fatigue Syndrome/Fibromyalgia environmental
sensitivities.
All of
these conditions are long-term and do not resolve, but require
special diet, supplements, physiotherapy and other types of body
work, and stress reduction techniques.
Dr. M. Zazula,
M.D. stated in his/her letter of February 7, 2002:
Rhonda Ray
is a patient under my care for treatment of medical conditions
including multiple allergy problems. Ms. Ray must follow a
prescribed regimen of consuming natural foods and use products
that eliminate and are free of chemicals, preservatives, and
other substances that would contribute to an aggravation of her
condition. Failure to do so would increase her level of illness
and physical disability, thereby compromising her
well-being.
Mary
O'Reilly, N.D. stated in her letter of February 14,
2002:
Rhonda Ray
is a patient who suffers from Myalgic Encephalomyelitis/Chronic
Fatigue and Immune Dysfunction Syndrome, Multiple Chemical
Sensitivity, and Fibromyalgia. These are chronic illnesses
requiring a persistent, multi-faceted treatment protocol of
nutritional supplementation, a diet comprised of chemical-free
organic foods and purified water, natural remedies and personal
care products, physical therapy for pain relief and increased
mobility, as well as lifestyle changes.
These
modalities are prescribed as essential components of a successful
treatment plan, without which the prognosis for
Ms. Ray's health and ability to function as a productive
member of society would be severely adversely
affected.
[4]
Also the Appellant presented an extract from an address by
Dr. George Grant, M.Sc. C. Chem. M. Ed.D. prepared as a
submission to the House of Commons. The principal portions of
that address read as follows:
Mr.
Speaker, Multiple Chemical Sensitivity, Chronic Fatigue Syndrome,
and Fibromyalgia affect between 6-15% of the Canadian population.
Of those affected, approximately 1-2% are so severely debilitated
they require hospitalization. This is a large number of
Canadians, Mr. Speaker, and this issue demands our
attention.
I would
like to explain to the Members of the House a bit more about
these illnesses and their affect on Canadians.
Multiple
Chemical Sensitivity or Environmental Illness is a chronic
condition where symptoms recur in response to low levels of
exposure to multiple unrelated chemicals and improve or resolve
when these chemicals are removed. It is a multiple-organ
disorder. Multiple Chemical Sensitivity is closely related to
Chronic Fatigue Syndrome and Fibromyalgia and symptoms overlap in
these three conditions.
In 1994,
the US Center for Disease Control concluded that chronic fatigue
syndrome is "a clinically defined condition characterized by
persistent fatigue and a variety of multi-system symptoms".
The core symptoms include excessive fatigue, general muscular and
joint pain, mental fogginess, and often gastrointestinal
problems. Other symptoms include fatigue following stressful
activities, headaches, sore throat, sleep disturbance, low grade
fever and depressed mood. The symptoms fluctuate in severity and
persist for a prolonged period. The exact cause of chronic
fatigue syndrome is not yet known. Current etiological theories
proposed are: neuro-endocrine dysfunction, viruses, environmental
toxins, genetic predisposition, head injury and stress. The
disease is more prevalent in women than men.
Fibromyalgia Syndrome is a painful muscle disorder in which
the thin film or tissue (myofacsia) holding muscle together
becomes tightened or thickened, causing pain. It is also known as
Fibrositis. This disorder shares many of the same symptoms as
chronic fatigue syndrome. It is much more common in women than in
men.
Mr.
Speaker, the sad truth is that these illnesses destroy not only
the health of those they afflict, but also the lives of
Canadians. Imagine your child being rendered bed-ridden by
allergic reactions to the new carpeting in his or her school, or
imagine your spouse becoming disabled after his her office was
renovated. These are the realities of people afflicted with
Multiple Chemical Sensitivity.
Now,
imagine that your niece or nephew catches the flu and never
recovers. Think about that niece or nephew unable to prepare
meals or clean house or care for her children - let alone work to
support his or her family. Imagine this condition carrying on for
five years or more. These are the realities of people affected by
chronic fatigue syndrome.
[5]
Dr. George Grant also gave testimony supporting the foregoing
medical opinions, which were not disputed by the Respondent. Also
it is clear from his testimony and that of the Appellant that the
Appellant who, at the hearing appeared in very good health both
physically and mentally, that if the products she was taking i.e.
the organic foods, special water etc. were not taken on a regular
basis as described she would be flat on her back. In other words,
these items that she is taking keep her healthy. Without them she
would be very unhealthy.
ANALYSIS
[6]
118.2(2)
For the purposes of subsection (1), a medical expense of an
individual is an amount paid
...
(n)
for drugs, medicaments or other preparations or substances (other
than those described in paragraph (k)) manufactured,
sold or represented for use in the diagnosis, treatment or
prevention of a disease, disorder, abnormal physical state, or
the symptoms thereof or in restoring, correcting or modifying an
organic function, purchased for use by the patient as prescribed
by a medical practitioner or dentist and as recorded by a
pharmacist.
[7]
The agent for the Appellant also referred to paragraph
118.2(2)(k) which reads as follows:
for an
oxygen tent or other equipment necessary to administer oxygen or
for insulin, oxygen, liver extract injectible for pernicious
anaemia or vitamin B12 for pernicious anaemia, for use by the
patient as prescribed by a medical practitioner;
[8]
The agent argued that these products are similar to those taken
by the Appellant.
[9]
Reference should also be made to Interpretation Bulletin IT-519R2
where
paragraph 61
provides as follows:
...
61.
For purposes of calculating the medical expense tax credit, there
are two categories of drugs, medicaments or other preparations or
substances (other than those included in the account of a medical
practitioner (see ¶ 4 above) or hospital) the
cost of
which may qualify as medical expenses:
(a)
the
substances, mentioned in paragraph 118.2(2)(k) (insulin,
oxygen and, for pernicious anaemia, liver extract and vitamin
B12) which, for purposes of this paragraph, a medical
practitioner must have prescribed, but which a pharmacy or any
other type of store may sell without a written prescription;
and
(b)
the drugs
(and other items), referred to in paragraph 118.2(2)(n),
which a medical practitioner or dentist must have prescribed, and
which must be purchased from a pharmacist who has recorded the
prescription in a prescription record.
[10] The purpose
of referring to all of the provisions bearing on this matter is
to point out that a broad and liberal latitude is accorded by the
Act, Regulations and Bulletins. Further, these
provisions appear to encourage for an interpretation favourable
to the person taking the medication.
[11] There are
several similar cases where certain items have been disallowed
because they, although prescribed by a doctor, were nevertheless
not recorded by a pharmacist. There are also a number of cases
where this Court used the latitude provided for by paragraph
118.2(2)(n) to interpret it in a manner which would allow
the deduction, despite the absence of the conventional situation
of a pharmacist filling out a prescription.
[12] In this
connection I refer to the case of Frank v. R., [2001] 3
C.T.C. 2596. In that case Teskey T.C.J. had a similar problem. He
stated at paragraph 7 and
following:
7. The evidence of
the Appellant is unchallenged. The Appellant suffers from HIV.
Who annually, pays - in round figures - $700 for vitamins and
supplements, which she says she requires because of her medical
problems, since people that have this disease lose the ability or
the body loses the ability to manufacturer these required
vitamin. In order to maintain life, various vitamins and
supplements are required.
8. The provision of
the Income Tax Act (the "Act") that deals with this is
found in Section 118.2(2)(n). The words that have to be looked at
are the last six words of that section. They are: "as
recorded by a pharmacist".
9. For clarity, this
whole subsection reads,
"for drugs, medicaments or
other preparations or substances (other than those described in
paragraph k) manufactured sold or represented for use in the
diagnosis for treatment or prevention of a disease, disorder,
abnormal physical state of the symptoms thereof or in restoring,
correcting or modifying an organic function, purchased for use by
the patient as prescribed by a medical practitioner or dentist
and as recorded by a pharmacist."
10. There has been
one case referred to me and that is of my colleague, Rip, and he
did deal with vitamin and mineral supplements. In that case
reading his reasons, I cannot find that the vitamins and
supplements therein were prescribed by a medical practitioner or
dentist. He comes to the conclusion that vitamins and supplements
do not fit the statute. I am well aware that a decision of a
colleague deserves the highest respect and should be followed.
However, in this case we have the vitamins and supplements
prescribed by a physician and I have the evidence before me that
they are required to sustain the life of the
Appellant.
11. The Respondent
takes the position that what the words, "as recorded by a
pharmacist", means that it has to be a prescription drug
that is a drug that requires a prescription before it can be
sold. The Appellant argues that if that is what Parliament meant
the subsection would simply read, "for drugs prescribed by a
medical practitioner or a dentist as found on the list of
prescribed drugs." The section doesn't say that. It goes
quite further, and is much broader than that.
12. The question to
me is can I ignore, "as recorded by a
pharmacist".
[13] The
Frank case has spurred on further decisions, which try to
explain why and to what extent the Courts can interpret the
provision in a manner which allows the deduction of the items at
issue. Specifically, Judge Miller in Pagnotta v. R.,
[2001] 4 C.T.C. 2613 states at paragraph 30 of that
judgment:
I am not however prepared to
ignore the requirement of a pharmacist. The Appellant relied
heavily on the recent decision of Judge Teskey in the
Frank case, where he asked the same question. He did not
ignore the words either, but instead, having found substances had
been prescribed by a medical practitioner, found that
"recorded" could be the pharmacist's purchase or
sales slip.
[14] Deputy
Judge Rowe in Dunn v. R., [2002] 2 C.T.C. 2007 followed
Judge Miller's decision in Pagnotta by stating that
the requirement of "recorded by a pharmacist" cannot be
read disjunctively.
[15] The cases
concerning 118.2(2) all agree with Judge Teskey's decision in
Frank that the "recorded by a pharmacist"
requirement encompasses much more than the conventional situation
where a prescription drug is filled out by a pharmacist. However,
I am unaware of any case that clearly indicates what the
expression "recorded by a pharmacist" means.
[16] In the
case at hand, the facts and evidence sufficiently establish that
the items in issue, organic foods and bottled water, are
"medications" falling under 118.2(2) because without
them, the Appellant would be robbed of being a functioning and
productive member of society. To quote Judge Teskey, the items
are "required to sustain the life of the
Appellant".
[17] In any
event, the medications in the case at hand, prescribed by a
doctor and purchased outside of a pharmacy, cannot possibly be
recorded by a pharmacist. This impossibility leads me to conclude
that requirement is not necessary for items that have been
prescribed by doctors and which truly cure the patient and render
him or her capable of living a normal life again.
[18] Going back
to Judge Teskey's question in Frank, "Can I
ignore 'as recorded by a pharmacist'", I would
answer that question with a "yes". I qualify that
"yes" with that this can only occur in very special
circumstances. With reference to Judge Miller's and Deputy
Judge Rowe's decisions stating that the pharmacist
requirement cannot be ignored, to again use the words of Judge
Teskey:
I am well aware that a decision
of a colleague deserves the highest respect and should be
followed. However, in this case we have the vitamins and
supplements prescribed by a physician and I have the evidence
before me that they are required to sustain the life of the
Appellant.
[19] To hold
otherwise would, in my opinion, produce an extremely narrow and
absurd interpretation of the section. Because the ambiguous
phrase "recorded by a pharmacist" was not ignored,
Judge Teskey, in Frank, at paragraph 11 interpreted
"recorded by a pharmacist" as including sales slips.
Judge Miller, in Pagnotta, at paragraph 30 decided that
items acquired from a pharmacy can fall within the meaning of
paragraph 118.2(2)(n) but those same items from a
different store cannot. Deputy Judge Rowe, in Dunn, at
paragraph 13 stated that a record made by a licensed pharmacist
of medications prescribed to the patient by a medical
practitioner - even though not prepared, dispensed or supplied
within that licensed pharmacy - would seem to satisfy the
requirements of the provision.
[20] With
respect, the ambiguity in the provision has resulted in judicial
acrobatics with the purpose of fitting a taxpayer's situation
within the provision. It is my opinion that common sense should
prevail. If the medications are prescribed by a doctor and they
make the difference between life and death or functioning or not
functioning, they should fall under paragraph
118.2(2)(n).
[21] Judge
Miller at paragraph 30 in Pagnotta and Deputy Judge Rowe
at paragraph 13 in Dunn, could not ignore the requirement
"recorded by a pharmacist" because to do so would
render that portion of the legislation meaningless. It is my
opinion that the term was worded so broadly that in cases where
common sense dictates that the medications should be deductible,
the phrase can be set aside.
[22] My answer
to the question, "Can I ignore 'recorded by a
pharmacist'" was "yes" but I qualified that
"yes". Specifically, my qualification mirrors that
of
Judge Miller in Pagnotta,
at paragraph 30:
I wish to be clear that this is
not intended to be an open invitation to taxpayers whose
lifestyle includes a regimen of vitamins to rely on paragraph
118.2(2)(n) for obtaining a credit on the basis that such
costs constitute medical expenses. This is limited to the rare
situation of a taxpayer suffering sever medical problems,
attempting to relieve those problems through a variety of
treatments recommended by a number of medical
practitioners.
[23] As I
mentioned previously, I believe these provisions should be
interpreted liberally and in favour of the taxpayer. For the
above reasons the appeal is allowed.
[24] There
shall be no costs.
Signed at
Ottawa, Canada, this 20th day of September, 2002.
J.T.C.C.COURT
FILE
NO.:
2002-710(IT)I
STYLE OF
CAUSE:
Rhonda Ray v. The Queen
PLACE OF
HEARING:
Toronto, Ontario
DATE OF
HEARING:
August 14, 2002
REASONS FOR
JUDGMENT BY: The Honourable Judge
Terrence O'Connor
DATE OF
JUDGMENT:
September 20, 2002
APPEARANCES:
Agent for
the
Appellant:
Sandor
Feld
Counsel
for the
Respondent:
Joel Oliphant
COUNSEL OF
RECORD:
For the
Appellant:
Name:
Firm:
For the
Respondent:
Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
2002-710(IT)I
BETWEEN:
RHONDA
RAY,
Appellant,
and
HER MAJESTY
THE QUEEN,
Respondent.
Appeal heard
on August 14, 2002, in Toronto, Ontario,
by the
Honourable Judge Terrence O'Connor
Appearances
Agent for
the
Appellant:
Sandor Feld
Counsel
for the
Respondent:
Joel Oliphant
JUDGMENT
The appeal
from the reassessment made under the Income Tax Act for
the 1999 taxation year is allowed, and the matter is referred
back to the Minister of National Revenue for reconsideration and
reassessment in accordance with the attached Reasons for
Judgment.
There shall
be no costs awarded.
Signed at
Ottawa, Canada, this 20th day of September, 2002.
J.T.C.C.
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