T-1288-92
BETWEEN:
HER
MAJESTY THE QUEEN,
Plaintiff,
-
and -
MARCELLE
MERCIER,
Defendant.
REASONS
FOR ORDER
TREMBLAY-LAMER
J.
This
is an appeal de novo from a decision by the Tax Court of Canada allowing
the defendant’s appeal from a notice of assessment issued against her for the
1988 taxation year.
I.The Facts
In
1988, the defendant maintained by herself a domestic establishment in which she
lived with her son, who was twenty‑four (24) years old at the time and
was not suffering from any mental or physical infirmity. Her son’s income that
year was $695.21. Thus, the defendant was wholly supporting him. For the 1988
taxation year, she accordingly claimed a credit for a wholly dependent related
person under paragraph 118(1)(b) of the Income Tax Act
(hereinafter “the Act”),
which read as follows at the relevant time:
118. (1) For the purpose of computing the tax payable under
this Part by an individual for a taxation year, there may be deducted an amount
determined by the formula
A
x B
where
A
is the appropriate percentage for the year, and
B
is the aggregate of,
* * *
(b)in the case of an individual not entitled to a deduction by
reason of paragraph (a) who, at any time in the year,
(i)is an unmarried person or a married person who neither supported nor
lived with his spouse and is not supported by his spouse, and
(ii)whether by himself or jointly with one or more other persons,
maintains a self-contained domestic establishment (in which the individual
lives) and actually supports therein a person who, at that time, is
(A)except in the case of a child of the individual, resident in Canada,
(B)wholly dependent for support on the individual, or the individual and
such other person or persons, as the case may be,
(C)related to the individual, and
(D)except in the case of a parent or grandparent of the individual,
either under 18 years of age or so dependent by reason of mental or physical
infirmity,
an
amount equal to the aggregate of
(iii)$6,000, and
(iv)an amount determined by the formula
5 000 $
- (D - 500 $)
where
Dis the greater of $500 and the income for the year of the dependent
person;
Thus,
under clause 118(1)(b)(ii)(D) of the Act, when a claim is made in
respect of a person other than a parent or grandparent of the individual, the
credit is granted only if:
(1) the related person is under 18 years of age or
(2)the
related person is over 18 years of age but is dependent by reason of mental or
physical infirmity.
In
the case at bar, as noted above, the defendant’s son was over 18 years of age
and was not suffering from any mental or physical infirmity. Since the
defendant did not meet the conditions for the subsection in question to apply,
she was denied the credit. The defendant submits that the age condition in
clause 118(1)(b)(ii)(D) of the Act is contrary to the provisions of
subsection 15(1) of the Canadian Charter of Rights and Freedoms
(hereinafter “the Charter”).
II.Issues
Does
the age condition included in clause 118(1)(b)(ii)(D) of the Act
infringe subsection 15(1) of the Charter? If so, is that infringement of
subsection 15(1) justified under section 1 of the Charter? If it is not
justified, is the remedy being sought, namely a finding that clause 118(1)(b)(ii)(D)
of the Act is of no force or effect, an appropriate remedy?
III.Tax Court of Canada Judgment
Judge
Lamarre Proulx recognized that age is a ground of discrimination under
subsection 15(1) of the Charter. However, she noted that not every distinction
based on age is necessarily discriminatory. She expressed the opinion that a
distinction based on age will not infringe subsection 15(1) unless it has a
discriminatory effect on the complainant.
In
considering whether paragraph 118(1)(b) of the Act has a discriminatory
effect, she began by looking at whether there is a discrete and insular
minority in respect of which the Court should be vigilant. She found that in
the case at bar there are two such groups: the group of persons claiming the
credit and the group of wholly dependent related persons. Moreover, among the
group of persons claiming the credit, she drew a distinction between persons to
whom the credit is actually granted and those to whom it is denied because of
the age of the dependent related person. In her view, the latter group is one
that is often disadvantaged. She also felt that the determination of whether
the impugned subsection has a discriminatory effect required an analysis of its
purpose and object. In her opinion, the primary purpose of the subsection is
to provide tax relief to persons who maintain a domestic establishment in which
they live with a related person who is wholly dependent on them for support.
These considerations led her to find that clause 118(1)(b)(ii)(D) of the
Act has a discriminatory effect and therefore infringes subsection 15(1) of the
Charter.
Because
of her conclusion with respect to subsection 15(1) of the Charter, she moved on
to the section 1 analysis. In this regard, she referred to the criteria
established by the Supreme Court of Canada in R. v. Oakes. She applied the following
criteria: first, it must be shown that there is an objective that is
sufficiently important to warrant the infringement of a Charter right. She
stated that a sufficiently important objective is one that relates to pressing
and substantial concerns. She then considered the proportionality test, which
has three separate components:
(1)the measures must be rationally connected to the
objective;
(2)the means chosen must be such as to impair the
guaranteed right in question as little as possible; and
(3)there
must be a proportionality between the direct effect of the chosen measures and
the importance of the objective in question.
As
far as the importance of the objective was concerned, she found that
Parliament’s desire to reduce the national debt, spread the tax burden and give
effect to the government’s priorities are pressing and substantial concerns.
She
then considered whether there is a rational connection between the measure
adopted and Parliament’s desire to reduce the national debt. In this regard,
she expressed regret that no evidence had been adduced to show the economic
effect of making the credit inapplicable to wholly dependent related persons
who are over 18 years of age. She nevertheless found that there is a rational
connection in the case at bar because of the fact that there are various
federal and provincial statutes that guarantee a minimum income to wholly
dependent related persons over 18 years of age.
However,
she concluded that the measure adopted does not meet the minimal impairment
test. She attached great importance to the fact that in most cases the measure
penalizes parents who support their children on their own. She accordingly found
that the restriction imposed by clause 118(1)(b)(ii)(D) of the Act
is not justified under section 1.
Having
found that the clause infringes subsection 15(1) of the Charter and is not
saved by section 1, she considered whether she had jurisdiction to grant a
remedy and then what the appropriate remedy should be. With regard to the
jurisdiction of a Tax Court of Canada judge to grant a remedy under section 52
of the Constitution Act, 1982,
she referred to the principles formulated by La Forest J. in Douglas/Kwantlen
Faculty Association v. Douglas College. In her view, that case
established that administrative tribunals and lower courts have the power to
rule on the constitutional validity of statutes as part of the mandate
conferred on them. She therefore expressed the view that the mandate of Tax
Court of Canada judges, as set out in sections 12 and 171 of the Tax Court
of Canada Act,
is broad enough to authorize them to consider the constitutionality of
statutes.
In
Judge Lamarre Proulx’s view, the appropriate remedy in the case at bar is a
declaration that clause (D) of subparagraph 118(1)(b)(ii) of the Act is
of no effect. She reached that conclusion because clause (D) is not essential
to the existence of subparagraph 118(1)(b)(ii). The appeal by
Ms. Mercier, the defendant in these proceedings, was therefore allowed.
IV.The Parties’ Arguments
The
plaintiff acknowledged that the defendant would have been entitled to the
credit had it not been for the requirement concerning the related person’s
age. However, she argued that the requirement was consistent with subsection
15(1) of the Charter. She submitted that clause 118(1)(b)(ii)(D)
of the Act does not discriminate based on age. She added that, even if there
is discrimination within the meaning of subsection 15(1), the conditions
set out in paragraph 118(1)(b) of the Act are justified under section 1
as reasonable limits in a free and democratic society. Finally, she submitted
in the alternative that if the measure set out in paragraph 118(1)(b)
does infringe subsection 15(1), it is covered by subsection 15(2) of the
Charter.
The
defendant began by noting that the requirement concerning the child’s age was
added in 1988. The provision had existed for a long time and its application
depended solely on whether the related person was wholly dependent.
Historically, therefore, Parliament applied only that criterion to determine
whether to grant the credit. By adding the age condition, the defendant
argued, Parliament infringed subsection 15(1) of the Charter. She submitted
that this is because clause 118(1)(b)(ii)(D) of the Act adversely
affects a vulnerable, discrete, low-income minority that is a victim of age
discrimination. Finally, she argued that this infringement is not saved by the
operation of section 1.
V.Analysis
A.Applicable Principles
1. Purpose and Effect of the Act
Since
R. v. Edwards Books
and R. v. Big M Drug Mart Ltd.,
it has been accepted that both the purpose and the effect of legislation are
relevant in determining whether it is consistent with the Charter’s
principles. Either an unconstitutional purpose or an unconstitutional effect
can invalidate legislation. The purpose and effect of legislation were defined
as follows in R. v. Big M Drug Mart Ltd.:
All legislation is
animated by an object the legislature intends to achieve. This object is
realized through the impact produced by the operation and application of the
legislation. Purpose and effect respectively, in the sense of the
legislation’s object and its ultimate impact, are clearly linked, if not
indivisible.
Thus,
in the context of a constitutional challenge based on the Charter, the
purpose—that is, the object of the legislation—and the effect—that is, the
ultimate impact of the legislation—are both relevant. It must be ensured that
both are consistent with the principles set out in the Charter.
However,
in Big M Drug Mart Ltd.,
Dickson J. (as he then was) also said the following about how the purpose and
effect of legislation interact:
If the acknowledged
purpose of the Lord’s Day Act, namely, the compulsion of sabbatical
observance, offends freedom of religion, it is then unnecessary to consider the
actual impact of Sunday closing upon religious freedom. Even if such effects
were found inoffensive, as the Attorney General of Alberta urges, this could
not save legislation whose purpose has been found to violate the Charter’s
guarantees. In any event, I would find it difficult to conceive of legislation
with an unconstitutional purpose, where the effects would not also be
unconstitutional.
The
effect of legislation cannot make it constitutionally valid if its purpose
violates any of the Charter’s guarantees. The effect may, however, make
legislation constitutionally invalid even if its purpose complies with the
Charter’s guarantees.
Dickson
C.J. expressed a similar view in Edwards Books, in which he wrote the
following:
Even if a law has a
valid purpose, it is still open to a litigant to argue that it interferes by
its effects with a right or freedom guaranteed by the Charter. It will
therefore be necessary to consider in some detail the impact of the Retail
Business Holidays Act.
2.Subsection 15(1) of the Charter
Subsection
15(1) of the Charter reads as follows:
15. (1) Every individual is equal before and under the law and has the
right to the equal protection and equal benefit of the law without
discrimination and, in particular, without discrimination based on race,
national or ethnic origin, colour, religion, sex, age or mental or physical
disability.
It
was in Andrews v. Law Society of British Columbia that the parameters for
the application of the rule set out in subsection 15(1) were established. In
my view, those parameters were misunderstood by the honourable Tax Court of
Canada judge. Having found that a distinction had been drawn based on one of
the grounds enumerated in subsection 15(1), namely age, she did not have to
consider whether there was a discrete and insular minority when she determined
the discriminatory effect of that distinction. The parameters that every court
must apply in a review under subsection 15(1) of the Charter are as follows:
(1)the impugned statute must draw a distinction,
intentional or otherwise, between the individual, as a member of a group, and others;
(2)that distinction must be based on an enumerated or
analogous ground; and
(3)the
legislative impact of the statute must be discriminatory, that is, it must
impose a burden not imposed on others.
In
Rudolf Wolff & Co.
and a few years later in Symes,
the Supreme Court of Canada reaffirmed what it had already held in Andrews: the process applicable
under subsection 15(1) of the Charter is essentially a comparative one. It is
this same comparative process that makes it possible to determine whether the
statute creates a distinction, classification or differentiation.
Although
the Supreme Court clearly adopted a three-step analysis in Andrews and the decisions that
followed it, the trilogy of Miron v. Trudel, Egan v. Canada and Thibaudeau v. Canada marked the emergence of a
fourth criterion, namely relevance.
Thus,
to the classic test used in an analysis under subsection 15(1) of the Charter,
Lamer C.J. and La Forest, Major and Gonthier JJ. added a new step that
determines whether there is a relevant basis for the distinction drawn by the
legislator based on an enumerated or analogous ground. When applying this
fourth and final test, the linguistic, philosophical and historical context in
which the issue arises must be borne in mind. It should be noted that the
addition of this fourth test means that a legislative distinction may be found
not to restrict the right guaranteed by subsection 15(1) of the Charter
even if it is discriminatory and based on an enumerated or analogous ground.
However,
not all the members of the Court agreed on the inclusion of this fourth step.
Sopinka, Cory, Iacobucci and McLachlin JJ. objected to the inclusion of such a
test, which they considered unacceptable because it would completely
marginalize the rule set out in section 1 of the Charter.
L'Heureux-Dubé
J. did not express any view on the relevancy test. Since the Supreme Court is
equally divided, I will take account of this new test in applying the rule set
out in subsection 15(1) of the Charter to the facts of this case.
3.Section 1 of
the Charter
Section 1 of the Charter reads as follows:
1. The Canadian Charter of Rights and Freedoms guarantees the
rights and freedoms set out in it subject only to such reasonable limits
prescribed by law as can be demonstrably justified in a free and democratic
society.
The
principles applicable to a section 1 analysis were established by the Supreme
Court of Canada in R. v. Oakes.
Since that case, the courts have consistently and unanimously applied those principles.
More recently, in Dagenais v. Canadian Broadcasting Corporation, the principles were
reaffirmed. In R. v. Laba,
the Supreme Court of Canada, per Sopinka J., summarized them as follows:
1) In order to be sufficiently important to warrant overriding a
constitutionally protected right or freedom the impugned provision must relate
to concerns which are pressing and substantial in a free and democratic
society;
2) The means
chosen to achieve the legislative objective must pass a three-part proportionality
test which requires that they (a) be rationally connected to the objective,
(b) impair the right or freedom in question as little as possible and (c)
have deleterious effects which are proportional to both their salutary effects
and the importance of the objective which has been identified as being of
“sufficient importance”.
B. Application
to the Case at Bar
1.Preliminary Remarks
At
this point, the specific characteristics of the Income Tax Act should be
considered. In determining whether the provision in question draws a
distinction, I must bear in mind the specific nature of the Act and the
personal credit schemes it establishes. In Thibaudeau, the Supreme Court of
Canada held that it is intrinsic to the Income Tax Act to create
distinctions so as to generate revenue for the state while equitably
reconciling a set of interests that are necessarily divergent.
As
far as personal credits are concerned, the courts have found that their purpose
is to make the tax system fairer by recognizing the different circumstances of
taxpayers and taking account of their differing ability to pay taxes as a
result of those circumstances.
2.Subsection 15(1) of the Charter
(a)Whether
paragraph 118(1)(b) of the Act draws a distinction between the
individual, as a member of a group, and others
To
begin with, I do not think it can be said that the provision draws a
distinction between various taxpayers based on their respective incomes.
Eligibility for the credit is independent of the income of the taxpayer claiming
it. Parliament is therefore not seeking to provide tax relief to low-income
taxpayers.
Paragraph
118(1)(b) draws a distinction between married and unmarried taxpayers.
In my view, however, that distinction cannot serve as a basis for this challenge.
It was decided in Schachtschneider v. R. that the provision does
not discriminate against married taxpayers. Mahoney J.A. stated the
following in that case:
There may be others
differently treated by subsection 118(1) on the basis of personal characteristics,
but the group now in issue is composed of married persons with a child of the
marriage, living together and not supporting each other. In my opinion, that
is not a group that can be described as being disadvantaged in the context of
its place in the entire social, political and legal fabric of our society. It
follows that it is not a distinct and insular minority within the contemplation
of section 15. The distinction made by subsection 118(1) of the Income Tax
Act between married and unmarried persons in those like circumstances is
not discriminatory.
Paragraph
118(1)(b) also draws a distinction between unmarried taxpayers
supporting an adult child who is not suffering from any mental or physical
infirmity and those wholly supporting a minor child, a parent or grandparent or
an adult suffering from a mental or physical infirmity. This distinction
having been established, I believe it is appropriate to turn to the second step
of the test.
(b)Whether the distinction is based on an enumerated
or analogous ground
Is
the distinction drawn by the Act based on an enumerated or analogous ground?
In the case at bar, the only ground being relied on is age, to which subsection
15(1) expressly refers. Age is a personal characteristic. This personal
characteristic must also be a characteristic of the members of the group in
respect of which the Act draws a distinction, namely taxpayers wholly
supporting a child who is not suffering from any mental or physical infirmity
and is over 18 years of age. This is what was noted by McIntyre J. in Andrews:
. . .
discrimination may be described as a distinction, whether intentional or not
but based on grounds relating to personal characteristics of the individual
or group, which has the effect of imposing burdens, obligations, or
disadvantages on such individual or group. . . . (emphasis added)
That
is not the case here. The distinction drawn by the Act is based not on the age
of the members of the group identified above, but on the age of the person in
respect of whom the credit is being claimed.
I
will not express any view as to whether the status of a taxpayer wholly
supporting a child who is not suffering from any mental or physical infirmity
and is over 18 years of age can be considered an analogous ground. The
defendant did not make such an argument.
In
light of my finding with regard to the second test, I do not consider it
necessary to look at the third test, which seeks to determine whether the
distinction drawn by the Act imposes a burden, disadvantage or obligation on
the group in question.
(i) Discrimination by association
The
defendant argued that discrimination by association can exist. She submitted
that there can be an infringement of subsection 15(1) of the Charter even
when the distinction drawn by the Act is based on a personal characteristic
(enumerated in subsection 15(1) or analogous to those enumerated therein) of
another person, that is, the dependent person. Although this argument was not
accepted by the majority of the Federal Court of Appeal in Benner v. The
Queen,
it was the subject of a dissenting opinion by Linden J.A. Assuming that the
argument could succeed, it should nevertheless be asked whether every
distinction based on age is necessarily discriminatory, that is, whether such a
distinction necessarily imposes a burden, disadvantage or obligation.
Even
assuming that the distinction imposes a burden on taxpayers wholly supporting a
related person who is over the age of 18, is that distinction based on a relevant
personal characteristic enumerated in subsection 15(1)?
(c)The
relevancy test
Without
expressing any view on the validity of the relevancy test, I would say that its
application to the case at bar leads to the conclusion that clause 118(1)(b)(ii)(D)
does not restrict the right guaranteed by subsection 15(1) of the Charter.
When
the ground relied on is that of age, it must be determined whether there are
“solid grounds for importing benefits on one age group over another”. In the
case at bar, Parliament has established the age of 18 as the standard, since at
that age children are considered independent and capable of supporting
themselves. As noted by Létourneau J.A. in Lister:
In the context of
determining whether a child is dependent on his parents or not, age is a most
relevant factor. Barring the odd exception, it is the factor which applies,
and is applied, most commonly, conveniently and fairly to the proper
determination of the family unit for benefit-allocation purposes.
This
age is the same one used in a number of federal and provincial statutes to
determine when a person is entitled to vote
or buy tobacco
or alcohol
or must contribute to a pension plan.
The
functional value of the Act in this instance is to take account of when a
person is considered to have attained a sufficient degree of financial
independence. The goal is to grant a tax credit to a taxpayer supporting a
person who is related to the taxpayer and whose ability to be independent is
limited, namely a minor child, an adult suffering from an infirmity or a parent
or grandparent who cannot support himself or herself for some reason. Thus,
the distinction drawn by Parliament is based not on a stereotypical assumption
about a group, but on an objective standard: the person’s level of
independence. In light of this functional value, I would be inclined to find
that the distinction is based on a relevant personal characteristic
enumerated in subsection 15(1), namely age.
3.Section 1 of the Charter
Although
I have found that paragraph 118(1)(b) of the Act is consistent with the
equality guarantee in subsection 15(1) of the Charter, I have decided to
proceed with the analysis under section 1 of the Charter. This will enable me
to make certain findings of fact based on the evidence adduced by the
plaintiff, findings that will be helpful if the defendant’s arguments under
section 15 of the Charter are accepted on appeal.
(a) Sufficiently important objective
The
plaintiff’s evidence shows that the purpose of the 1988 tax reform, as far as
personal deductions are concerned, was to make the system more consistent and
harmonize it with other legislative provisions in order to preclude, for
example, a person being considered independent under certain legislative
provisions but dependent under others. The reform was intended to provide tax
relief to taxpayers with dependants whose ability to be independent is limited,
namely minors, adults with a mental or physical infirmity and parents or
grandparents.
(b)The
proportionality test
(i)Means proportional to the objectives to be
attained
The
criterion adopted by Parliament to determine whether a person is independent is
the age of 18, except if the person has a mental or physical infirmity or is a
parent or grandparent.
As
we have seen, this is the age used in a number of federal and provincial
statutes to determine when a person begins to have certain rights or
obligations. In most provinces, 18 is the age of majority.
As
noted above, I believe the age of 18 to be relevant in light of the Act’s
objective of taking account of when a person not suffering from any mental or
physical infirmity is considered to have attained a sufficient degree of
financial independence. Parliament grants a credit to taxpayers who are
supporting a person whose ability to be independent is limited.
(ii)Minimal impairment
Reference
should be made to the warning first given by the Supreme Court in Irwin Toy
Ltd.
and repeated numerous times since. The courts must be flexible when
applying the minimal impairment test to a statute in which the legislature,
acting as a mediator, has had to choose among the claims of competing groups
and distribute scarce resources among them.
It
is therefore not a question of finding the best possible restriction, but of finding
a reasonable restriction.
In
the case at bar, paragraph 118(1)(b) of the Act does not totally exclude
persons who are over 18 years of age. The credit is granted if the dependent
person, although over 18 years of age, has an infirmity or is a parent or
grandparent.
The
House of Commons and Senate committees had suggested that the age limit be set
at 21 rather than 18. That suggestion was not accepted, since Parliament
preferred to promote the harmonization of the tax system by adopting the age of
18. In any event, the fact that children’s education and tuition fee credits
can be transferred to their parents met the committees’ concerns in this
regard.
In
my view, in light of the current economic situation in which the government
must reduce its expenditures and increase its revenues to deal with the
deficit, there is no doubt that the government was justified in making the
choice it made. In these circumstances, the impairment was minimal.
(iii)Deleterious effects
It
follows from the foregoing that the effects of paragraph 118(1)(b) of
the Act on taxpayers whose adult children are dependent on them are not so
significant that they take precedence over the government’s objective of
providing tax relief that takes account of the time when a person not suffering
from any infirmity is considered to have attained a sufficient degree of
financial independence and of the limited ability of certain persons to be
financially independent.
VI.Disposition
I
am of the view that clause 118(1)(b)(ii)(D) of the Act is not a
restriction on the right guaranteed by subsection 15(1) of the Charter. In any
event, if I had found that the clause was inconsistent with subsection 15(1), I
would have held that such a restriction was justified under section 1.
For
these reasons, the plaintiff’s appeal is allowed. The assessment by the
Minister of National Revenue against the defendant for the 1988 taxation year
is confirmed.
OTTAWA,
Ontario
The
15th day of November 1996
Danièle Tremblay-Lamer
JUDGE
Certified
true translation
A.
Poirier
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