Date: 20010831
Docket: T-1299-00
Neutral Citation: 2001 FCT 979
Between:
JANE HEDGES-MCKINNON and RICHARD MCKINNON,
Applicants,
- and -
THE CANADIAN HUMAN RIGHTS COMMISSION,
Respondent.
REASONS FOR ORDER
Muldoon, J.
1. Introduction
[1] The applicants seek judicial review of two decisions of the Canadian Human Rights Commission (the Commission), dated June 26, 2000, dismissing their respective complaints against the Canada Customs and Revenue Agency (the Agency or the agency) under section 5 of the Canadian Human Rights Act, R.S.C. 1985, Chap. H-6 (the CHRA). The applications were joined for judicial review by Mr. Justice Teitelbaum on July 18, 2000, and the matter was heard by this Court on June 18, 2001.
2. Statement of Facts
[2] The applicants submitted separate complaints to the Commission on July 19, 1999. Jane Hedges-Mckinnon alleged discrimination on the basis of marital status and sex, contrary to section 5 of the CHRA. Richard Mckinnon alleged discrimination based on marital status. The couple were married in 1989.
[3] At all material times, Jane Hedges-Mckinnon was a professional golfer and an instructor at a golf school. The school was co-owned by the applicants. In 1985, Richard Mckinnon signed a sponsorship agreement with Jane Hedges-Mckinnon whereby he undertook to pay the expenses which she would incur as a professional golfer. By letter dated September 18, 1997, the Agency informed Richard Mckinnon that the expenses which he incurred while sponsoring Jane Hedges-Mckinnon could not be deducted as business expenses because the sponsorship did not engender a reasonable expectation of profit.
[4] In October, 1997, it reassessed Richard Mckinnon for the 1994, 1995, and 1996 taxation years. The Agency also reassessed Jane Hedges-Mckinnon for the 1996 taxation year. The Agency rejected Richard Mckinnon's objection by letter dated April 29, 1998:
Our review of the Notice of Objection filed by you for the taxation years 1994, 1995 and 1996 is now completed. The review encompassed an analysis of the losses which you were claiming with respect to the sponsorship of your spouse. Losses relating to such activity are deductible so long as the operation is a business and is carried on with a reasonable expectation of profit. This is a question of fact which can only be determined by considering the details of each particular case.
Some criteria that are considered when examining the concept of "reasonable expectation of profit" are the following:
- significance and growth of revenue
- the amount of capital invested in the operation
- an analysis of the reasons for incurring the losses to date and the steps being taken to improve the situation
- planned or intended course of action
- profit and loss experience in past years
The circumstances surrounding your operation have been examined and reviewed. We have resolved that there is no reasonable expectation of profit from the operation of sponsoring your spouse. The primary factors that influenced this decision are as follows:
- large losses continued over a period of ten years and were material averaging $14,300 per year
- the gross revenue has stayed relatively the same for the ten year period, between $1,000 - $3,000, except for the years 1993 and 1995 where it was $4,200 and $4,900 respectively.
- the personal element and non-business motive to claim the losses, i.e, the reduction of your income for tax purposes and your personal interest in golf.
...
The finding of no reasonable expectation of profit from the sponsorship of your spouse to play professional golf is not a decision on your spouse's ability to play golf but on the deductibility of the losses from the sponsorship under the Income Tax Act.
[5] The applicants appealed to the Tax Court of Canada. On November 9, 1999, Mr. Justice Brulé allowed the deductions as business expenses.
[6] Each applicant complained of discrimination on the basis of marital status. Jane Hedges-Mckinnon also alleged discrimination on the basis of sex, because the agency did not appreciate that it is more difficult for female professional golfers to become financially successful than it is for male professional golfers. It should be asked why this is so, if it be so.
[7] On February 29, 2000, a Human Rights Commission investigator recommended that the Commission refuse to deal with both complaints. The Commission accepted these recommendations, and the applicants were so notified by letter dated June 26, 2000. It can be noted that in a version of their record filed on September 14, 2000, Jane Hedges-McKinnon complained of being "deprived of her locus standi", but this was not argued orally.
[8] The investigator stated the following regarding Richard Mckinnon's complaint of discrimination on the ground of marital status:
Summary of Complaint
1. The complainant alleges that the respondent discriminated against him because he is married, when it determined in 1997 that his business, which he operated in partnership with his wife, did not have a reasonable expectation of profit, and subsequently disallowed the incurred business expenses from 1994 to 1996.
2. The respondent objected to the complaint on the basis that it was outside the Commission's jurisdiction.
Background
3. On January 1, 1985, the complainant entered into a sponsorship agreement with Jane Hedges whereby he agreed to pay all the expenses related to the training and development of her career as a professional golfer. The name "Jane Hedges-Mckinnon" was the business name used. The business consisted of teaching golf and Jane Hedges-Mckinnon's participation in golf tournaments.
4. The complainant and Ms. Hedges later married in 1989.
5. In 1997, the respondent advised the complainant that it had determined that the business did not have a reasonable expectation of profit, and that all incurred expenses from 1994 to 1996 were declared to have been "personal" expenses and therefore not deductible on his income tax returns.
6. The complainant filed a Notice of Objection on or about December 9, 1997. By letter dated April 29, 1998, the respondent referred to the 1985 sponsorship agreement as a "sponsorship of your spouse"and determined that "there is no reasonable expectation of profit from the operation of sponsoring your spouse." The complainant asserts that the respondent did not view the sponsorship agreement as a true business relationship.
Jurisdiction
7. The respondent objected to the complaint stating that the Canadian Human Rights Commission does not have the jurisdiction to review the substantive elements of an income tax assessment. The respondent states that the original income tax assessment of 1996, giving rise to the complaint is based on substantive tax considerations regarding qualifying business losses, and not the marital status of the complainant.
8. The complainant maintains that the respondent recognized the sponsorship agreement only as a "spousal sponsorship"and not a true business arrangement. He asserts that a male professional golfer would be allowed to deduct his business expenses related to golfing. The complainant also asserts that the respondent refuses to recognize the disparity in golf purses for men and women and the reality that it takes approximately 13 years for a female golfer to earn a profit.
Allegation regarding the Complainant's Income Tax Assessments
9. It appears the respondent based its assessment of the 1994, 1995 and 1996 income tax returns on clear policy principles. These principles were set out in letters to the complainant from the respondent. The first letter, dated September 18, 1997, stated that the complainant had been "claiming [business] losses since 1988 and that [the respondent] permitted the deduction of losses in prior years to allow [the complainant] to show a profit after the number of consecutive years of losses."
10. Another letter, dated April 29, 1998, stated that the primary factors which influenced the respondent's decision, (that there was no reasonable expectation of profit from the operation of sponsoring [the complainant's] spouse were: "large losses continued over a period of ten years[...]; gross revenue stayed relatively the same for the ten year period[...]; and the personal element and non-business motive to claim the losses, that is, the reduction of [the complainant's] income for tax purposes and [his] personal interest in golf."
11. From 1985 to 1993, the respondent allowed the complainant to deduct the business losses, but after eight years, determined that the deductions could not continue because there was no reasonable expectation of profit. It does not appear that determination by the respondent, that the business had no reasonable expectation of profit, was based on the complainant's marital status. As stated earlier, the complainant married Jane Hedges-Mckinnon in 1989 and the deductions were allowed from 1985 to 1993. (Emphasis added).
12. The complainant brought an appeal of the 1994, 1995 and 1996 assessments before the Tax Court of Canada. The Tax Court is an independent tribunal which provides the means to settle differences between the respondent and a taxpayer. The appeal was heard in August 1999. In a decision dated November 8, 1999, the Tax Court allowed the complainant's appeal and the assessments were referred back to the respondent for reconsideration and reassessment.
13. The respondent has indicated its intention to comply with the decision of the Tax Court of Canada.
14. The disparity in golf purses for male and female professional golfers would appear to be because of the differing revenues of the male and female golfing associations, rather than discrimination in the agency's application of the Income Tax Act.
Recommendation
15. It is recommended, pursuant to subparagraph 44(3)(b)(i) of the Canadian Human Rights Act, that in all the circumstances of the complaint, no further proceedings are warranted because:
- the complaint has been dealt with according to a procedure provided for under another Act of Parliament, namely the Tax Court of Canada;
and
- the appropriate remedy in this matter, a reassessment for the 1994, 1995, and 1996 taxation years, has been granted by the Tax Court of Canada.
[9] The investigator stated the following in her report regarding Jane Hedges-Mckinnon's complaints of discrimination on the grounds of marital status and sex:
Summary of Complaint
1. The complainant alleges that the respondent discriminated against her because she is female and married, when it determined in 1997 that her business, which she operated in partnership with her husband, did not have a reasonable expectation of profit, and subsequently disallowed the incurred business expenses from 1994 to 1996.
2. On January 1, 1985, the complainant entered into a sponsorship agreement with Richard Mckinnon whereby he agreed to pay all her expenses related to the training and development of her career as a professional golfer. She in turn agreed to pay him 25 percent of her earnings as a professional golfer. The name "Jane Hedges-Mckinnon" was the business name used. The business consisted of teaching golf and Jane Hedges-Mckinnon's participation in golf tournaments.
3. The complainant and Mr. Mckinnon married in 1989.
4. In 1997, the respondent advised Mr. Mckinnon that it had determined that the business did not have a reasonable expectation of profit, and that all incurred expenses from 1994 to 1996 were declared to have been "personal" expenses and therefore not deductible on his income tax return.
5. The complainant's husband filed a Notice of Objection on or about December 9, 1997. By letter dated April 29, 1998, the respondent referred to the 1985 sponsorship agreement as a "sponsorship of your spouse" and determined that "there is no reasonable expectation of profit from the operation of sponsoring your spouse." The complainant asserts that the respondent did not view the sponsorship agreement as a true business relationship and that it failed to recognize that female professional golf players earn less money than male professional golf players.
Jurisdiction
6. The respondent objected to the complaint stating that the Canadian Human Rights Commission does not have the jurisdiction to review the substantive elements of an income tax assessment. The respondent states that the original income tax assessment of 1996, giving rise to the complaint is based on substantive tax considerations regarding qualifying business losses, and not the marital status of the complainant.
7. The issues regarding the deductibility of the expenses is an issue for Richard Mckinnon, the sponsor, not the complainant, because it was Richard Mckinnon who reported the complainant's expenses on his income tax return. The complainant did not report her expenses on her own income tax return. Accordingly, it would appear that any dispute regarding the deductibility of the complainant's expenses would be a matter between Richard Mckinnon and the respondent. As such, the complainant has no cause of action against the respondent regarding her business expenses.
8. The disparity in golf purses for male and female professional golfers would appear to be because of the differing revenues of the male and female golfing associations, rather than discrimination in the respondent's application of the Income Tax Act.
Other Related Information
9. Through a review of the complainant's 1996 income tax return, the respondent determined in 1997 that she was not entitled to receive a Goods and Services Tax (GST) Credit Payment and that what had already been paid to her was an overpayment.
10. The complainant brought an appeal of the 1996 assessment before the Tax Court of Canada. The Tax Court is an independent tribunal which provides the means to settle differences between the respondent and a taxpayer. The appeal was heard in August 1999. In a decision dated November 8, 1999, the Tax Court allowed the complainant's appeal and the assessment was referred back to the respondent for reconsideration and reassessment.
11. The respondent has indicated its intention to comply with the decision of the Tax Court of Canada.
Analysis
12. The complainant did not report her expenses on her income tax return. Rather, it was her husband who reported the complainant's expenses on his own income tax return. Accordingly, any dispute regarding the expenses is a matter between the complainant's husband and the respondent. The appropriate remedy for the complainant's assessment for the 1996 taxation year, a reassessment, has been granted by the Tax Court of Canada.
Recommendation
13. It is recommended, pursuant to section 41(l)(c) of the Canadian Human Rights Act, that the Commission not deal with the complaint because it is beyond its jurisdiction in that the facts as alleged by the complainant would not constitute a discriminatory practice.
3. Issues
[10] Did the Commission err in dismissing Jane Hedges-Mckinnon's complaint under paragraph 41(l)(c) of the CHRA, and Richard Mckinnon's complaint under subparagraph 44(3)(b)(i) of the CHRA?
4. Analysis
Legislative Framework
Commission to deal with complaint
41(1) Subject to section 40, the Commission shall deal with any complaint filed with it unless in respect of that complaint it appears to the Commission that
...
(c) the complaint is beyond the jurisdiction of the Commission;
...
Designation of investigator
43(1) The Commission may designate a person, in this Part referred to as an "investigator", to investigate a complaint.
...
Report
44(1) An investigator shall, as soon as possible after the conclusion of an investigation, submit to the Commission a report of the findings of the investigation.
...
(3) On receipt of a report referred to in subsection (1), the Commission
...
(b) shall dismiss the complaint to which the report relates if it is satisfied
(i) that, having regard to all the circumstances of the complaint, an inquiry into the complaint is not warranted, or
(ii) that the complaint should be dismissed on any ground mentioned in paragraphs 41(c) to (e).
...
The Standard of Review
[11] Under section 43 of the CHRA, the Commission may appoint an investigator to review a complaint. Although the investigator conducts the investigation as an extension of the Commission, the Commission is free to adopt or to reject the investigator's conclusions and recommendations. Under subparagraph 44(3)(b)(i) of the CHRA, following receipt of an investigator's report, the Commission may dismiss a complaint if it is satisfied "that, having regard to all the circumstances of the complaint, an inquiry into the complaint is not warranted." Under subparagraph 44(3)(b)(ii), the Commission may dismiss a complaint on any ground enumerated in paragraphs 41(c) to (e).
[12] In Holmes v. Canada (Attorney General) (1999), 242 N.R. 148 (F.C.A.), Mr. Justice Décary reiterated the standard of review for decisions of the Commission under section 44 of the CHRA at page 149:
[4] In our view, when it is exercising its screening functions, the Commission is vested with a very wide latitude. That has been the law for some time now, and it was stated again by this Court in its recent decision in Bell Canada v. Communications, Energy and Paperworkers Union of Canada in the following words:
[35] It is settled law that when deciding whether a complaint should be referred to a tribunal for inquiry under sections 44 and 49 of the Canadian Human Rights Act, the Commission acts "as an administrative and screening body"(Cooper v. Canada (Human Rights Commission), [1996] 3 S.C.R. 854, at page 893, La Forest J.) and does not decide a complaint on its merits (see Northwest Territories v. Public Service Alliance of Canada (1997), 208 N.R. 385 (F.C.A.)). It is sufficient for the Commission to be "satisfied that, having regard to all the circumstances of the complaint, an inquiry into the complaint is warranted" (subsections 44(3) and 49(1)). This is a low threshold and the circumstances of this case are such that the Commission could have validly formed an opinion, rightly or wrongly, that there was "a reasonable basis in the evidence for proceeding to the next stage" (Syndicat des employés de production du Québec et de l'Acadie v. Canada (Canadian Human Rights Commission), supra, paragraph 30, at page 899, Sopinka J., approved by La Forest J. in Cooper, supra, at page 891.
[...]
[38] The Act grants the Commission a remarkable degree of latitude when it is performing its screening function on receipt of an investigation report. Subsections 40(2) and 40(4) and sections 41 and 44 are replete with expressions such as "is satisfied", "ought to", "reasonably available", "could more appropriately be dealt with", "all the circumstances", "considers appropriate in the circumstances" which leave no doubt as to the intent of Parliament. The grounds set out for referral to another authority (subsection 44(2)), for referral to the President of the Human Rights Tribunal Panel (paragraph 44(3)(a) or for an outright dismissal (paragraph 44(3)(b)) involve in varying degrees questions of fact, law and opinion (see Latif v. Canadian Human Rights Commission, [1980] 1 F.C. 687 (C.A.), at page 698, Le Dain J.A.), but it may safely be said as a general rule that Parliament did not want the courts at this stage to intervene lightly in the decisions of the Commission.
[5] The question before the Commission at this stage was whether, having regard to all the circumstances of the complaint, an inquiry was warranted. The Commission found it was not. There are a number of legitimate reasons or reasonable grounds upon which the Commission could decide the way it did. In reaching a conclusion the Commission is entitled and obligated to have regard to all of the facts and allegations placed before it. In this case, there was sufficient evidence on which the Commission could conclude that further consideration of the matter by a tribunal was not warranted. As was noted by La Forest J. in Cooper v. Canada (Human Rights Commission):
[...] It is not the job of the Commission to determine if the complaint is made out. Rather its duty is to decide if, under the provisions of the Act, an inquiry is warranted having regard to all the facts. The central component of the Commission's role, then, is that of assessing the sufficiency of the evidence before it [...]
...
[13] The Commission's decision to dismiss a complaint under subsection 44(3) is an administrative decision which is subject to the requirements of procedural fairness, but not to the full panoply of the rules of natural justice. When deciding whether a complaint should proceed to inquiry before a tribunal, the Commission's duty is to have regard to the facts, to the CHRA, and to assess the sufficiency of the evidence before it. The Commission's power to dismiss a complaint is discretionary, and is entitled to a high degree of deference. On judicial review, this Court should intervene only where the decision was based on irrelevant or extraneous factors, or where the discretion was exercised in a discriminatory, unfair, capricious or unreasonable manner.
Decision by the Commission
[14] The Commission's decisions to dismiss the applicants' complaints were reasonable having regard to the evidence before it. The evidence before the Commission regarding Jane Hedges-Mckinnon was that:
a. the expenses incurred which allowed her to participate in professional golf tournaments had been borne by Richard Mckinnon;
b. those expenses were not reported by Jane Hedges-Mckinnon's as business deductions. They were not reported by her at all on her income tax returns; and
c. Richard Mckinnon reported those expenses on his own income tax returns.
[15] The evidence before the Commission regarding Richard Mckinnon was that:
a. he had paid the expenses of Jane Hedges-Mckinnon for her to compete in professional golf tournaments;
b. he claimed those expenses as business deductions on his income tax returns;
c. the Agency assessed those returns on the basis that the business of sponsoring Jane Hedges-Mckinnon had no reasonable expectation of profit. The Agency maintained that decision after a Notice of Objection had been filed; and
d. that decision was appealed to the Tax Court of Canada which overturned the decisions of the Agency and ordered a reassessment of Richard Mckinnon's income tax returns for the 1994, 1995 and 1996 taxation years.
[16] The applicants submitted Attorney General of Canada (Applicant) v. Druken, [1989] 2 F.C. 24 (C.A.) to support their position. In Druken, supra, the Federal Court of Appeal upheld an order by a Canadian Human Rights Tribunal rendering certain sections of the Unemployment Insurance Act inoperative. The legislation denied unemployment insurance benefits to complainants who were employed by their husbands or by companies where at least 40% the voting shares were controlled by their husbands. In the case at bar, that the applicants were married was not an issue in the agency's decision, and the investigating officer's conclusions were reasonable.
[17] Jane Hedges-Mckinnon submits that the Commission erred by refusing to appoint a Tribunal to inquire into her complaint that the agency discriminated against her on the basis of her sex when it did not recognize that female professional golf tournament players earn less than their male counterparts. On this ground, the Court agrees with the investigator that Jane Hedges-Mckinnon has no cause of action because it was her husband who deducted the expenses from his tax return. As such, the dispute is between him and the agency. The investigator's report was reasonable.
[18] The Court sympathizes with the situation of the applicants, however, it cannot be said that the Commission's decision was based on irrelevant or extraneous factors, and its discretion was not exercised in a discriminatory, unfair, capricious or unreasonable manner. Therefore, there is no basis for this Court to set aside the decision under review.
5. Other Grounds for Relief
Procedural Fairness
[19] The applicants state that they were denied procedural fairness, although this point was not pressed during oral submissions. The Commission fully complied with the requirements of procedural fairness. The applicants received copies of the investigation report and they filed submissions in response. The Commission considered the applicants' responses in making its decision to dismiss the complaints.
Conduct of the Staff
[20] The applicants submit that the Commission and its staff were negligent in the conduct of this complaint. No evidence was presented to support this assertion, and the matter was not argued during oral submissions. The Court therefore declines to review this alleged ground.
6. Conclusion
[21] This application will be dismissed. No costs are awarded to any party, although costs usually follow the event. The conclusion is more closely run than the Commission suspects but, of course, a definitive determination had to be made. The Court does not fault the Commission's counsel, in so observing. Although the applicants' cases blew away in the end like the seed-fluff of a dandelion, it was not entirely unreasonable of the applicants to have commenced this proceeding. Their real and effective remedy come from the Tax Court of Canada; it is unfortunate that they did not understand that. So in the exercise of the Court's discretion it will not impose costs on the unsuccessful applicants, all without faulting the respondent's conduct.
Judge
Ottawa, Ontario,
August 31, 2001.
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