Date: 20061017
Docket: A-118-05
Citation: 2006 FCA 331
CORAM: SHARLOW
J.A.
PELLETIER J.A.
MALONE
J.A.
BETWEEN:
CLAIRE LISTER
Appellant
and
HER MAJESTY THE QUEEN
Respondent
REASONS FOR JUDGMENT
SHARLOW J.A.
[1]
This is an
appeal by Claire Lister, and a cross appeal by the Crown, of a judgment of the
Tax Court of Canada (2005 TCC 113), rendered under the informal procedure of
that Court in relation to Ms. Lister’s income tax appeals for the years 2001,
2002 and 2003.
[2]
During the
years under appeal, Ms. Lister resided at Hawthorn Park, which describes itself as a “residence
for seniors”. Ms. Lister paid the owners of Hawthorn Park “accommodation and service fees” and certain
other amounts totalling approximately $27,000 for each of the years under
appeal. As consideration for those payments, Ms. Lister obtained the right to
occupy an apartment, two prepared meals each day in the dining room, a 24 hour
emergency call system and health monitoring with a personal pendant, medical supervision
to assist her with medication four times a day, assistance with puffers, and laundry
and housekeeping services.
[3]
Hawthorn Park also had a residence
called Orchard Manor that was equipped to provide secure facilities and 24 hour
nursing care for persons suffering from Alzheimer’s disease or dementia. During
the years under appeal, Ms. Lister did not reside in Orchard Manor.
[4]
Ms. Lister
was born in 1923. During the years under appeal, she had a number of medical
conditions that worsened over time. Her mobility and mental functions were
impaired. She was at constant risk of falling, and of suffering a stroke. She
required assistance with health care monitoring, medication administration,
meal planning and preparation, personal care, and also needed access to a 24
hour emergency response service. The evidence was that her medical condition
was so severe that her adult children were unable to care for her at home, which
is why she moved to Hawthorn
Park. At one point, all cooking
facilities were removed from her room because she was at risk of endangering
herself with them.
[5]
In each of
the years under appeal, Ms. Lister claimed the medical expense tax credit under
paragraph 118.2(2)(e) of the Income Tax Act, R.S.C. 1985, c. 1 (5th
supp.) for the full amounts she paid to Hawthorn Park. That claim was not allowed.
[6]
Ms. Lister
filed a notice of objection. The objection was partially successful, not on the
basis of her original claim, but on the basis of two different provisions. As a
result of the objection, Ms. Lister was allowed a medical expense credit for
each year on the basis that $10,000 of the amounts she paid to Hawthorn Park
qualified as remuneration for attendant care under paragraph 118.2(2)(b.1)
of the Income Tax Act. Ms. Lister was also allowed, in each year, the
maximum disability tax credit under section 118.3 of the Income Tax Act.
Broadly speaking, the tax relief resulting from the disability tax credit is approximately
the same as the tax relief for a medical expense credit for expenses of $6,000
per year. The disability tax credit is available to a person who has a severe
and prolonged mental or physical impairment, the effects of which are that the ability
to perform one or more basic activities of daily living is markedly restricted
(see section 118.3 of the Income Tax Act).
[7]
Ms. Lister
was not satisfied with the disposition of her objection, and she appealed to
the Tax Court on the basis of the claims she originally made. The Tax Court
Judge allowed Ms. Lister’s appeal. His judgment resulted in Ms. Lister
obtaining the tax relief she had originally claimed, which was a medical
expense tax credit under paragraph 118.2(2)(e) for the full amounts she
paid to Hawthorn Park, but nothing for attendant care under paragraph 118.2(2)(b.1)
and no disability tax credit under section 118.3.
[8]
Ms. Lister
appealed to this Court on the basis that the Tax Court Judge erred in
disallowing the disability tax credit. The Crown concedes that the Tax Court
Judge erred on that point, because the disability tax credit had been allowed
after Ms. Lister’s objection and her entitlement to the disability tax credit was
not in issue in the Tax Court. Ms. Lister’s appeal will be allowed with the
Crown’s consent.
[9]
The Crown
cross-appealed on the basis that the Tax Court Judge erred in concluding that
Ms. Lister was entitled to a medical expense credit under paragraph 118.2(2)(e)
of the Income Tax Act for the full amounts paid to Hawthorn Park, rather
than a medical expense credit under paragraph 118.2(2)(b.1) in respect
of a maximum of $10,000 per year of those payments.
[10]
The Crown
argues that the judgment under appeal is based on an incorrect interpretation
of paragraph 118.2(2)(e) of the Income Tax Act, while counsel for
Ms. Lister argues that the case turns primarily on questions of fact that must
be allowed to stand because there is no palpable and overriding error. Whether
a particular expense falls within paragraph 118.2(2)(e) is a question of
mixed law and fact. The Judge in this case was required to determine the
correct interpretation of paragraph 118.2(2)(e), and apply it to the
relevant facts. The factual elements of the Judge’s decision must stand absent
palpable and overriding error.
[11]
The Tax
Court Judge reasoned that, as Ms. Lister suffered from handicaps that met the
description in paragraph 118.2(2)(e), and those handicaps were
accommodated by the facilities of Hawthorn Park, it followed that Hawthorn Park
“specially provided” the facilities she needed for her care.
[12]
The Crown
argues that this reasoning is not correct. The Crown argues that in order to
determine whether a particular payment is eligible for the medical expense
credit under paragraph 118.2(2)(e), it is necessary to consider two
questions independently. The first question is whether the individual in
respect of whom the credit is claimed has the requisite physical or mental
handicap (in this case it is undisputed that Ms. Lister meets that test). The
second question is whether the place that received the payment is a place that
is within the scope of paragraph 118.2(2)(e). I agree with the Crown
that this is the correct way to approach the interpretation of paragraph
118.2(2)(e).
[13]
Subsection
118.2(2) of the Income Tax Act is a lengthy and detailed list of the
expenses that form the basis of a claim for a medical expense tax credit. Although
subsection 118.2(2) is amended frequently, no amendments relevant to this case
were made during the years under appeal, and so it is convenient to refer to
the version applicable to 2003. Only paragraph 118.2(2)(e) is directly
relevant to this case, but other portions of subsection 118.2(2) (in particular
paragraphs 118.2(2)(a), (b), (b.1), (b.2), (c)
and (d)), provide useful context.
[14]
The relevant
parts of subsection 118.2(2) read as follows (the emphasis is mine; note also that
I have shortened many of the paragraphs to a single word or phrase to give an
indication of the subject matter of the paragraph; I have omitted most of the
detailed lists and statutory preconditions within those paragraphs):
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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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(a) [medical practitioner, dentist or nurse or a public
or licensed private hospital];
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a) [médecin,
dentiste, infirmière ou infirmier, hôpital public ou hôpital privé agréé];
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(b) as remuneration for one full-time attendant … or for
the full-time care in a nursing home of, the patient in respect of whom an
amount would, but for paragraph 118.3(1)(c), be deductible under section
118.3 in computing a taxpayer's tax payable under this Part for the taxation
year in which the expense was incurred;
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b) à titre de
rémunération d'un préposé à plein temps […] aux soins du [patient] pour qui
un montant serait, sans l'alinéa 118.3(1)c), déductible en application de
l'article 118.3 dans le calcul de l'impôt payable par un contribuable en
vertu de la présente partie pour l'année d'imposition au cours de laquelle
les frais sont engagés -- ou à titre de frais dans une maison de santé ou de
repos pour le séjour à plein temps d'une de ces personnes;
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(b.1) as remuneration for attendant care provided in Canada to the
patient if
(i) the patient is a person in respect of whom an amount may be
deducted under section 118.3 in computing a taxpayer's tax payable under this
Part for the taxation year in which the expense was incurred,
(ii) no part of the remuneration is included in computing a
deduction claimed in respect of the patient under section 63 or 64 or
paragraph (b), (b.2), (c), (d) or (e) for any taxation year,
(iii) at the time the remuneration is paid, the attendant is
neither the individual's spouse or common- law partner nor under 18 years of
age, and
(iv) each receipt filed with the Minister to prove payment of
the remuneration was issued by the payee and contains, where the payee is an
individual, that individual's Social Insurance Number,
to the extent that the total of amounts so paid does not exceed
$10,000 (or $20,000 if the individual dies in the year);
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b.1) à titre
de rémunération pour les soins de préposé fournis au Canada au particulier, à
son époux ou conjoint de fait ou à une personne à charge visée à l'alinéa a),
dans la mesure où le total des sommes payées ne dépasse pas 10 000 $ (ou 20
000 $ en cas de décès du particulier dans l'année) et si les conditions
suivantes sont réunies:
(i) le particulier, l'époux ou
conjoint de fait ou la personne à charge est quelqu'un pour qui un montant
est déductible en application de l'article 118.3 dans le calcul de l'impôt
payable par un contribuable en vertu de la présente partie pour l'année
d'imposition au cours de laquelle les frais sont engagés,
(ii) aucune partie de la
rémunération n'est incluse dans le calcul d'une déduction demandée pour le
particulier, l'époux ou conjoint de fait ou la personne à charge en
application des articles 63 ou 64 ou des alinéas b), b.2), c), d) ou e) pour
une année d'imposition,
(iii) au moment où la rémunération
est versée, le préposé n'est ni l'époux ou conjoint de fait du particulier ni
âgé de moins de 18 ans,
(iv) chacun des reçus présentés au
ministre comme attestation du paiement de la rémunération est délivré par le
bénéficiaire de la rémunération et comporte, si celui-ci est un particulier,
son numéro d'assurance sociale;
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(b.2)
as remuneration for the patient's care or supervision provided in a group
home in Canada maintained and operated exclusively for the benefit of
individuals who have a severe and prolonged impairment …;
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b.2) à titre de rémunération pour le soin ou la
surveillance du [patient] dans un foyer de groupe au Canada tenu
exclusivement pour le bénéfice de personnes ayant une déficience grave et
prolongée […];
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(c)
as remuneration for one full-time attendant on the patient in a
self-contained domestic establishment in which the patient lives …;
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c) à titre de rémunération d'un préposé à plein
temps aux soins du [patient] dans un établissement domestique autonome où le
particulier, l'époux ou conjoint de fait ou la personne à charge vit […];
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(d) for the full-time care in a nursing home of the patient,
who has been certified by a medical practitioner to be a person who, by
reason of lack of normal mental capacity, is and in the foreseeable future
will continue to be dependent on others for the patient’s personal needs and
care;
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d) à titre de frais dans
une maison de santé ou de repos pour le séjour à plein temps du [patient] qu'un
médicine atteste être quelqu'un qui, faute d'une capacité mentale normale,
dépend d'autrui pour ses besoins et soins personnels et continuera d'en
dépendre ainsi dans un avenir prévisible;
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(e) for the care, or the care and training, at a school,
institution or other place of the patient, who has been certified by an
appropriately qualified person to be a person who, by reason of a physical or
mental handicap, requires the equipment, facilities or personnel specially
provided by that school, institution or other place for the care, or the care
and training, of individuals suffering from the handicap suffered by the
patient;
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e) pour le
soin dans une école, une institution ou un autre endroit -- ou le soin et la
formation -- du [patient], qu'une personne habilitée à cette fin atteste être
quelqu'un qui, en raison d'un handicap physique ou mental, a besoin
d'équipement, d'installations ou de personnel spécialisés fournis par cette
école ou institution ou à cet autre endroit pour le soin -- ou le soin et la
formation -- de particuliers ayant un handicap semblable au sien;
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(f) [transportation by ambulance];
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f) [le transport par
ambulance];
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(g)
[transportation];
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g) [le transport];
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(h) [other travel expenses];
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h) [les frais raisonnables
de déplacement, à l'exclusion des frais visés à l'alinéa g)];
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(i) [equipment];
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i) [l’équipement];
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(i.1) [equipment];
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i.1) [l’équipement];
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(j) [eye glasses];
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j) [les lunettes];
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(k) [equipment];
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k) [l’équipement];
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(l)
[animal specially trained to assist the patient]
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l) [un animal
spécialement dressé pour aider le patient];
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(l.1)
[expenses in respect of a bone marrow or organ transplant];
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l.1) [les frais pour une transplantation de la moelle
épinière ou d'un organe];
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(l.2) [renovations or alterations to a dwelling];
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l.2) [les rénovations ou
transformations apportées à l'habitation];
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(l.21) [construction of residence];
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l.21) [la construction de la
résidence];
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(l.3) [rehabilitative therapy];
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l.3) [les programmes de
rééducation];
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(l.4) [interpretation services];
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l.4) [les services
d'interprétation]
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(l.41)
[note-taking services];
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l.41) [les services de prise de notes];
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(l.42) [voice recognition software]
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l.42) [le logiciel de
reconnaissance de la voix];
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(l.5) [moving expenses];
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l.5) [les frais de
déménagement];
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(l.6) [alterations to the driveway];
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l.6) l[es transformations
apportées à la voie d'accès];
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(l.7)
[van];
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l.7) [une fourgonnette];
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(l.8)
[training];
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l.8)
[la formation];
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(l.9) [therapy];
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l.9) [le traitement administré];
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(l.91)
[tutoring services]
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l.91) [les services de
tutorat];
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(m)
[prescribed device or equipment];
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m) [le dispositif ou l’équipement d'un genre visé par règlement];
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(n) [drugs and medicaments];
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n) [les médicaments et les
produits pharmaceutiques];
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(o) [laboratory, radiological or other diagnostic
procedures];
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o) [les actes de
laboratoires, de radiologie ou autres actes de diagnostic];
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(p) [dentures];
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p) [es dentiers];
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(q) [a private health services plan]; or
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q) [un régime privé
d'assurance-maladie];
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(r)
[celiac disease].
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r) [la maladie coeliaque].
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[15]
One theme that emerges
from subsection 118.2(2)
is that no tax relief is provided for the ordinary expenses of living such as
the costs of accommodation and food, except where those expenses are
inextricably tied to a specific need resulting from a physical or mental
impairment.
[16]
For
example, for those whose medical needs are such that they require the care provided
by a nursing home or medical group home, the cost of that care qualifies for
tax relief under paragraph 118.2(2)(d) or (b.1) even though some
of that cost might relate to accommodation and meals. That is justified because
the primary function of a nursing home or medical group home is to provide
necessary medical care. Accommodation and meals are incidental to that medical
care.
[17]
There are
people who do not reside in a medical facility, but nevertheless require the
assistance of an attendant on a relatively constant basis. For those people, paragraphs
118.2(2)(b), (b.1) and (c) provide relief for the cost of
attendant care, which normally would not include accommodation or meals. That
is less generous than the relief provided for care in a nursing home or medical
group home, but the need is also less.
[18]
Given that statutory
context, what kind of place is contemplated by paragraph 118.2(2)(e)? According
to the words of the provision, an institution comes within paragraph 118.2(2)(e)
if it “specially provides” the equipment, facilities or personnel needed for
the care or training of its residents who require that specially provided
equipment, facilities or personnel by reason of a physical or mental handicap.
The circularity of this provision makes its interpretation somewhat awkward but
it is reasonably clear, at least, that paragraph 118.2(2)(e)
contemplates institutional care. For that reason, paragraph 118.2(2)(e) indirectly
but necessarily provides tax relief for accommodation and other ordinary living
costs that are included in the cost of care. However, given the context of subsection
118.2(2), an organization that functions mainly as a provider of residential
accommodation should not fall within the scope of paragraph 118.2(2)(e)
merely because it incidentally provides some medical services to its residents.
[19]
I turn now
to the facts of this case. The record establishes beyond doubt that the
principal function of Hawthorn
Park is to provide residential
accommodation. The accommodation offered by Hawthorn Park is enhanced by access to services that
are helpful to people who need or wish to have assistance with certain aspects
of daily living. Some of those services are medical in nature (particularly the
24 hour emergency response facility and the access to assistance with
medications), but in my view those services are incidental to Hawthorn Park’s principal function of providing
residential accommodation. A person may reside at Hawthorn Park whether they need access to those
services or not. In my view, given the statutory context, it is an unreasonable
stretch of the language of paragraph 118.2(2)(e) to find that those
additional services are “specially provided” for the care of its residents.
[20]
I conclude
that the Tax Court Judge incorrectly interpreted paragraph 118.2(2)(e),
which led him to allow Ms. Lister’s appeal when he should have dismissed it. I
would allow the appeal and the cross-appeal, and set aside the judgment of the
Tax Court. The Crown has conceded that it is liable for the reasonable and
proper costs of Ms. Lister on the cross-appeal.
“K.
Sharlow”
“I
agree
J.D. Denis Pelletier J.A.”.
“I
agree
B. Malone J.A.”.
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