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Citation: 2004TCC115
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Date: 20040205
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Docket: 2003-1208(IT)I
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BETWEEN:
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JAMES W. CHAMBERS,
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Appellant,
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and
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HER MAJESTY THE QUEEN,
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Respondent.
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REASONS FOR JUDGMENT
Rowe, D.J.
[1] The appellant appeals from an
assessment of income tax with respect to the 2001 taxation year.
Although allowing some medical expenses, the Minister of National
Revenue (the "Minister") disallowed expenses in the sum
of $6,662 representing the purchase of herbs, vitamins,
preparations and substances from a clinic operated by Dr. Chan
- a naturopath - and for other natural substances
purchased from an acupuncture and natural health clinic operated
by Dr. Elke.
[2] The appellant testified he is
retired and resides in Nanaimo, British Columbia. He advised
the Court that the sum of $1,142 paid to an acupuncturist was no
longer an issue in the within appeal. In 1989, the appellant was
suffering angina and was informed by his doctor that he could
anticipate undergoing angioplasty and bypass surgery. Instead,
the appellant opted for a course of chelation therapy as an
integral part of a treatment plan which included adherence to a
regimen of vitamins and diet supplements. Later, following the
diagnosis of cancer, the appellant was prescribed additional
vitamins while undergoing radiation therapy at a cancer clinic.
The appellant was obtaining treatment from Dr. Chan, a naturopath
practising in Vancouver. The vitamins and supplements prescribed
and supplied by Dr. Chan were not otherwise available and - later
- were ordered each month - by telephone - from Dr. Chan's
office. The appellant stated the Minister allowed - as a medical
expense - the sum of $172.53 which represented the fee portion of
the treatment session but disallowed the entire cost of the
prescribed herbs. The appellant stated he had heard about
chelation therapy while holidaying in Arizona and then discovered
a clinic in Nanaimo - operated by Dr. Cline - which offered that
particular treatment. In 2000, the Minister allowed the cost of
10 chelation treatments but had disallowed the cost of vitamins
consumed by the appellant during the course of that therapy. The
appellant stated he took the prescription to a dispensary in the
same clinic and obtained a receipt for each product purchased. At
that time, the products did not have an identification number
assigned to them. The appellant filed a letter - Exhibit A-1 -
from Greg Candy, a licensed pharmacist who operates a business
known as Clinical Nutrition. The appellant photocopied all
receipts and forwarded them to Canada Customs and Revenue Agency
(CCRA) together with a letter from Dr. Cline and the letter from
Greg Candy. The appellant filed - as Exhibit A-2 - a bundle of
receipts - signed (mainly) by Ms. Moss - and another person
employed at Clinical Nutrition - acknowledging payment for the
pre-packaged vitamins that the appellant would purchase on a
regular basis. The pharmacist - Greg Candy - was never present in
the clinic during these transactions.
[3] In cross-examination, the
appellant stated that Dr. Chan had dispensed the herbs directly,
some of which were consumed at his Vancouver office. The
appellant had been diagnosed with prostate and bladder cancer
which were being treated with radiation therapy and by certain
herbs, a small portion of which was ingested at Dr. Chan's
clinic but the rest were consumed at the appellant's home in
Nanaimo.
[4] Gregory Candy testified he resides
in Duncan and, as a licensed pharmacist in the province of
British Columbia, is employed full time by Shoppers Drug Mart.
Through a numbered corporation, he and his wife are the owners of
Clinical Nutrition, a business which provides health and
mineral supplements, primarily to patients of Dr. Cline. Since
that business is not a pharmacy, Candy stated he does not work
there although he does attend from time to time. During these
visits, he does not hold himself out to be a pharmacist. Candy
stated that - in 1997 - Dr. Cline had established a chelation
therapy clinic but due to certain regulations was prevented from
selling vitamins and supplements directly to his patients. As a
result, Candy started a business to dispense the vitamins and
supplements prescribed by Dr. Cline. Prior to embarking on the
business - Clinical Nutrition - Candy obtained
confirmation from the College of Pharmacists of
British Columbia (College) that he could instruct an
employee to sign the receipts for the products sold within that
business. In 2001, Candy stated his signature did not appear on
any receipts issued to customers of Clinical Nutrition and the
business was operated by May Ross, an individual extremely
knowledgeable in that field. Even in Shoppers Drug Mart, Candy
stated - by way of example - that if a physician were to
prescribe a particular brand of sun screen, the holder of the
prescription would usually proceed to the shelf where the product
was located, then take it - and the prescription - to a checkout
station, pay for it - either as a single product or among several
items - and obtain a receipt from the cashier. In 2001, Candy
stated Clinical Nutrition maintained a separate file for each
client receiving product from that store even though the use of a
product identification number was not included on the receipts
issued to the purchaser. Today, a receipt issued to a customer
will include Candy's name, signature, and the number of his
license issued by the College.
[5] At the conclusion of the evidence,
I informed the appellant that the Federal Court of Appeal - in
the case of Dunn v. The Queen, [2002] F.C.J. No. 1816
(QL) - had decided that a physician was not a pharmacist for
purposes of the Income Tax Act (the
"Act") and as a consequence, those herbs and
other items purchased directly from Dr. Chan could not be
considered an allowable medical expense. In addition, there was
no evidence which would permit me to affix a value to that
portion of the herbs actually consumed in Dr. Chan's office. The
appellant advised the Court that this amount was negligible in
relation to the overall cost of approximately $3,800 pertaining
to the purchase of herbs and other special supplements. I also
advised the appellant that the claim for the cost of the
eyeglasses could not be allowed because the expenditure was in
the wrong year. I informed the appellant that a relevant case of
similar nature - Ray. v. Canada, [2002] T.C.J. No.
500 (QL) - was in the course of being appealed to the
Federal Court of Appeal and suggested the reasons for judgment
issued in that case would provide the answer to the remaining
issue in the within appeal, i.e. whether the vitamins and other
supplements purchased from Clinical Nutrition could be considered
eligible for the medical expense tax credit. The appellant agreed
to await the decision of the Federal Court of Appeal.
[6] Counsel for the respondent
concurred in that approach.
[7] On January 5, 2004, the Federal
Court of Appeal released reasons for judgment in Ray v.
Canada, [2004] F.C.J. No. 1, Justice Sharlow, speaking for
the Court - at paragraph 2 - and following - of her judgment
stated:
[2] Ms. Ray's
claim for the medical expense tax credit is based on paragraph
118.2(2)(n) of the Income Tax Act, R.S.C. 1985, c.
1 (5th supp), which reads as follows:
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(2) For the purposes of subsection 118.2(1), a medical
expense of an individual is an amount paid
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(2) Pour l'application du paragraphe (1), les frais
médicaux d'un particulier sont les frais
payés :
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...
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...
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(n) for drugs, medicaments or other preparations
or substances (other than those described in paragraph
118.2(2)(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 ...
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n) pour les médicaments, les produits
pharmaceutiques et les autres préparations ou
substances -- sauf s'ils sont déjà
visés à l'alinéa k) --
qui sont, d'une part, fabriqués, vendus ou
offerts pour servir au diagnostic, au traitement ou
à la prévention d'une maladie, d'une
affection, d'un état physique anormal ou de
leurs symptômes ou en vue de rétablir, de
corriger ou de modifier une fonction organique et,
d'autre part, achetés afin d'être
utilisés par le particulier, par son époux ou
conjoint de fait ou par une personne à charge
visée à l'alinéa a), sur
ordonnance d'un médecin ou d'un dentiste, et
enregistrés par un pharmacien ...
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[3] The heart of the
decision of the Tax Court Judge is found at paragraphs 16, 17, 18
and 22 of his reasons:
[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 [in
Frank v. Canada, [2001] T.C.J. No. 416 (QL)], 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. ...
...
[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 v. Canada, [2001] T.C.J. No. 582 (QL)] 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
severe medical problems, attempting to relieve those problems
through a variety of treatments recommended by a number of
medical practitioners.
[4] The basis of the
Crown's application for judicial review is that the Tax Court
Judge erred in his interpretation of the phrase "as recorded
by a pharmacist" in paragraph 118.2(2)(n). The Crown
argues that those words limit the scope of
paragraph 118.2(2)(n) to substances dispensed by a
pharmacist under the legally mandated procedure for prescription
drugs, which requires the keeping of certain records. If the
Crown is correct, Ms. Ray is not entitled to the tax relief
claimed, because all of the substances in issue were purchased
off the shelf.
[8] Justice Sharlow - at paragraph 5 -
noted the legal issue had been considered many times by the Tax
Court and that in all of the cases except the Ray case,
the phrase, "as recorded by a pharmacist" was
considered to be an essential part of
paragraph 118.2(2)(n) of the Act. At paragraph
6, Justice Sharlow continued as follows:
[6] To similar
effect is the following obiter dictum in the decision of
Justice Rothstein, speaking for the Court in Dunn v.
Canada, [2002] F.C.J. No. 1816 (QL), at paragraph 6:
[6] Although we do
not need to decide the point, it would appear that the
requirement that medications be recorded by a pharmacist may be
to limit the entitlement to payments for medications that are
only available upon prescription as opposed to over the counter
or other medications. In this case the Tax Court Judge found that
the medications provided were not available through regular
pharmacies or other medical supply sources and upon our review of
the record, it is certainly not obvious that the medications
prescribed were prescription drugs.
[9] With respect to the meaning of the
words, "recorded by a pharmacist", Justice Sharlow
undertook the following analysis at paragraphs 11-16, inclusive
of her reasons:
Meaning of the words "recorded by a
pharmacist"
[11] In my view, the Tax Court
Judge erred in law when he concluded that the words "as
recorded by a pharmacist" in
paragraph 118.2(2)(n) could be ignored. I understand
why he felt that whose words represented an unjustifiable
impediment to tax relief for Ms. Ray. Like the Tax Court Judge, I
sympathize with Ms. Ray. However, it is not open to this
Court, or the Tax Court, to disregard statutory requirements
imposed by Parliament, even if they are difficult to rationalize
on policy grounds. It is for Parliament alone to determine
whether the words "as recorded by a pharmacist" should
be removed from paragraph 118.2(2)(n).
[12] In my view, it is
reasonable to infer that the recording requirement in paragraph
118.2(2)(n) is intended to ensure that tax relief is not
available for the cost of medications purchased off the shelf.
There are laws throughout Canada that govern the practice of
pharmacy. Although the laws are not identical for each province
and territory, they have common features. Generally, they
prohibit a pharmacist from dispensing certain medications without
a medical prescription, and they describe the records that a
pharmacist is required to keep for medications dispensed by
prescription, including information that identifies the
prescribing person and the patient. There is no evidence that
pharmacists anywhere in Canada are required to keep such records
for the substances in issue in this case.
[13] I cannot accept the
suggestion that, in the case of a medication that is prescribed
by a physician but is purchased at a pharmacy off the shelf, a
sales slip or invoice from the pharmacist would be a sufficient
"recording" to meet the statutory requirement. A record
in that form cannot meet the apparent function of the recording
requirement. There must be a record kept by the pharmacist in his
or her capacity as pharmacist. That necessarily excludes
substances, however useful or beneficial, that are purchased off
the shelf.
[14] Nor do I think it relevant
to the interpretation of paragraph 118.2(2)(n) that a
physician may dispense prescription medicines, and even sell
them, without breaching any legislation applicable to
pharmacists. It appears that a patient who purchases prescription
medications from a physician may not be entitled to a medical
expense tax credit because there would be no recording by a
pharmacist: see Dunn (cited above). Some may consider that
to be an unfair or inappropriate result. Perhaps it is, but that
cannot justify an interpretation of paragraph 118.2(2)(n)
that ignores the words "as recorded by a
pharmacist".
[15] Counsel for Ms. Ray has
cited Gibson v. Canada, [2001] F.C.J. No. 1758 (QL)
(F.C.A.) and Hamilton v. Canada, [2002] F.C.J. No. 422
(QL) (F.C.A.), two decisions of this Court that adopted the
"compassionate construction" of the medical expense and
disability tax credit provisions of the Income Tax Act.
Both of those cases involved statutory provisions that expressly
or by necessary implication required a factual determination of
the degree to which a person was affected by a particular illness
or physical disability. The Tax Court Judge in this case has
interpreted paragraph 118.2(2)(n) as though the
application of its closing words, "as recorded by a
pharmacist", may vary depending on the severity of the
patient's condition, so that if the condition is sufficiently
severe, the words may disappear altogether. He has, in effect,
added an extra-statutory condition to
paragraph 118.2(2)(n). Neither Gibson nor
Hamilton mandates such an approach.
Conclusion
[16] I conclude that Ms. Ray is
not entitled to a tax credit for the $6,555 she paid in 1999 for
vitamins, herbs, organic and natural foods, and bottled water.
The Crown's application for judicial review should be
allowed, the judgment of the Tax Court should be set aside, and
this matter should be remitted to the Tax Court for judgment in
accordance with these reasons. Despite the success of the
Crown's application, Ms. Ray is entitled to her reasonable
and proper costs of this application pursuant to section 18.25 of
the Tax Court of Canada Act.
[10] Considering the facts in the within
appeal, it is apparent none of the products purchased from
Clinical Nutrition had involved the intervention of Gregory
Candy, acting in his professional capacity as pharmacist. Candy
stated clearly in his testimony that, when he did visit the
clinic, he did not hold himself out to be a pharmacist. The
products which had been prescribed by Dr. Cline, operator of the
chelation therapy clinic, were obtained by patients off the shelf
in the store - perhaps with the assistance of the clerk - and she
signed the receipts for the products sold. Gregory Candy did not
sign any of the receipts issued by his employee.
[11] Prior to hearing the within appeal, I
had reserved my decision in another appeal - David
Selent v. Her Majesty the Queen - (Docket 2002-857(IT)I)
pending the issuance of the decision of the Federal Court of
Appeal in Ray, supra. I wrote my reasons for judgment in
Selent immediately prior to the within reasons and at
paragraph 13 and following stated:
From reading the reasons of Justice Sharlow, I conclude it was
the intention of the Court to exclude from eligibility - as a
medical expense under the specific provision of the Act
under consideration - any substance that may be purchased off the
shelf and that any record must be kept by the pharmacist "in
his or her capacity as a pharmacist" in accordance with the
applicable laws governing that profession.
Returning to the within appeal, it is clear the pharmacist -
Ms. Gregory - had not dispensed the substances in the course
of carrying out her duties as a dispensing pharmacist. Further,
none of the items was supplied from a licensed pharmacy but had
been obtained from Dr. Pincott's clinic, as revealed by the
invoices contained in Exhibits A-4 and A-5. There is nothing in
the evidence to suggest the purchase of any of the substances
prescribed by Dr. Pincott required the intervention of a
pharmacist acting in his or her professional capacity in
accordance with British Columbia legislation and/or adherence to
a professional code of conduct required by the College of
Pharmacists of British Columbia, the governing body of the
pharmacy profession.
It is apparent the within appeal cannot succeed as the
decision of the Federal Court of Appeal makes it certain the
relevant provision of the Act contemplates the dispensing
of prescription drugs and medications by a pharmacist within the
defined and regulated role as a pharmacist.
Overall, there may be some room for qualification under this
paragraph of the Act in the circumstance where a medical
practitioner prescribes a drug, medicament, preparation or
substance that is otherwise available without a prescription but
still requires the intervention of a pharmacist or other
qualified person - such as a pharmacy technician, employed under
the general supervision of a pharmacist to perform procedures of
a technical nature involved with dispensing medicines
- because the item is kept in the pharmacist's working
area - behind the counter - not accessible to the public. In this
instance, the product remains subject to control by a pharmacist
who may be required - in accordance with professional ethics - to
inquire about the intended use of the product and - in some cases
- issue warnings and/or provide specific instructions regarding
the manner of use and/or precautions to be taken. Products within
this category would include painkillers with codeine, various
types of inhalers such as those used to control symptoms caused
by asthma, cough syrups with codeine, and similar substances that
are not available to the customer directly "off the
shelf" in the sense that phrase is commonly understood by
anyone who has ever been inside a drug store. However, where a
medical practitioner prescribes one of these quasi-restricted
products to a patient, the dispensing of that prescribed
substance will require the intervention of a pharmacist - acting
in that professional capacity - including the creation of the
usual record to indicate the prescription had been filled. Under
these circumstances, it seems reasonable to expect this type of
purchase would be eligible for inclusion as a medical expense for
the purpose of calculating the tax credit, provided the
pharmacist had issued the usual prescription dispensing label for
that item, as though it had been a drug or substance available
only upon prescription. In some provinces or territories, there
may be certain substances - such as quinine - that can be
dispensed only upon prescription while in other jurisdictions
this product may be available directly to the consumer subject
only to the restriction that it be kept behind the counter and
delivered to the purchaser in accordance with the rules in effect
in that jurisdiction.
In accordance with the foregoing reasons, the within appeal is
hereby dismissed.
[12] Returning to the within appeal, it is
apparent it cannot succeed for the reasons stated herein - and in
Selent - which I adopt for the purposes of this
appeal.
[13] The appeal is hereby dismissed.
Signed at Sidney, British Columbia, this 5th day of February
2004.
Rowe, D.J.
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